There’s no better way to get a bona fide picture of what your credit card debt or potential credit card debt may look like than by using a credit card payment calculator to project potential “real” costs associated with your credit purchases. Whether you are looking to effectively eliminate your debt, or you are doing your homework researching all the various credit offers available to you, these calculators are quite handy and furnish a dramatic picture of the money you may have to potentially spend on your credit purchases.
Given our current economic climate and the instability of the global economy overall, many businesses, families, and individuals have been forced to take a hard and realistic look at minimizing their monthly costs and ratchet down budgets while still attempting to pay off unnecessary debts amassed through easy credit and lending focused on keeping people spending the money that has been keeping economies around the world afloat. Unfortunately, bankruptcy filings of all types have drastically risen throughout this prolonged economic contraction.
The credit card payment calculator is just one of many tools available to help you get real control over your spending or potential spending and enables you to make realistic decisions if you’re considering using one of those easy plastic money cards residing in your wallet. Consider the following real life example from someone I know very well.
She had two credit cards with a well established credit history that epitomized only the best credit ranking by the big three credit rating companies. Unfortunately, she lost some personal income in 2009 and began only making minimum payments while still using her cards to get by day-to-day. Sound familiar? It’s a story that has repeated itself over and over again and millions find themselves in the same situation. Regardless, it still doesn’t feel good to have to live through hard times.
She had a MasterCard and Discover card with an accumulated debt of $12853, a significant amount and certainly higher than the average by a measurable margin. By using a credit card payment calculator, she determined that if she only paid the minimum payment ($258 per month) at her current interest rate, she would be paying that same amount each and every month for the next 58 years, paying more than $44,000 in interest charges. Staggering to say the least, but very eye opening.
Here are the details and the different scenarios she laid out for a plan to pay-off her credit debt and get out from under a personally distressing financial situation. On each card noted above, the total on her MasterCard was $7823 at an APR of 18.9%. The Discover Card accounted for the remaining $5030 at the same 18.9% APR. Running the numbers together was easy since her interest rates were the same on both cards. She had previously been afforded a much lower interest rate of 8.9% on her MasterCard and 10.9% on her Discover Card; however, after making two late payments each card raised her ARP (Annual Percentage Rate, the interest rate set by the card issuer) to 18.9%. This is a frequent practice and one that is becoming more problematic for people struggling to pay their debts.
She used a credit card payment calculator to determine how long it would take her to repay her $12853 credit debt if she only made her minimum payment and came to the determination that she may never get out from under her debt. She determined that by paying an additional $100 per month above her minimum payment, she would dig herself out from under her debts in 5 years and would pay a mere $6242 in interest as opposed to the minimum payment scenario above.
Additionally, she contacted her credit card companies and discovered they were willing to work with her and lower her interest rates to a more manageable 12.9% saving her even more money and reducing her repayment time frame down to 4 years and reducing the amount of interest she paid by nearly 50%, a dramatic savings for making a phone call and working with her creditors.
Let’s face it, banks are in business to make money, and for the last several decades consumers have been conditioned to ignore the big picture and focus on one thing, the minimum monthly payment. These credit card payment calculators are a great way to get a real grasp of the kind of money you can potentially save, or spend, based on the decision to make your minimum monthly payment on your credit card debt.
No consumer should be without the knowledge available to them regarding their finances. Whether you are considering a new credit card, or looking to find ways to pay off your current credit card debts, these calculators are an invaluable tool in making effective and genuine financial decisions that can ultimately keep you from out of the credit debt catastrophe millions are faced with today.
