How A Credit Card Due Should Be Paid!

When you find it difficult to pay your credit card bills, the payment of the minimum amount due would come as a good relief to you though it may not help you to find a permanent solution to pay your credit card due. And soon you will be a victim of a debt trap. On divergent thought the assumption that the paying the minimum amount is a good option, is like digging your own grave. You will find that you are not the only person worried and confused about this. You should learn 2 words namely revolving credit and minimum payment. Let us see what it is:

The facilities that a revolving credit offers is that once you have an overdraft, you can use it as it remains in the existing credit limit provided you pay a minimum amount that includes interest charges. Once your balance is reduced, it increases your fund and thereby makes it available for your use within the credit limit. For example, if your overdraft is Rs.15000 and you made a purchase of Rs.10, 000 in value, you will have Rs.5000 for future purchases. Remember if you make a minimum payment that is normally 5% i.e. Rs.500, you will be left with Rs.9500 available credit.

By paying only the minimum amount due you end up paying only for the interest. This is because it will take a long time to cover the amount due, while it contains a large component of interest and a meager part of the amount of balance. It is wise enough to pay the amount within the due date since this will help you to escape from payment of interest on it. If you consider that the minimum payment is a more convenient one, then the banks are even happier.

1) By paying the minimum amount due for the whole year, you are actually paying more than 50% of the total amount due.

2) You will realize that even after paying half of the amount due, 83.24% of the amount is still owed.

3) After paying 50% of the amount due you end up paying only 16.75%.

4) How would you calculate how many more months it would take to reach your main your minimum of Rs.5000? It would take 196 more months i.e. 16 years. I repeat again it will take 16 years to achieve just the minimum amount of an outstanding of Rs.100, 000. By this time you would have already paid Rs.313.14% i.e. Rs.313, 148 instead of paying your amount due that was just Rs.100, 000.

So now you do understand what sort of a trouble you are putting your feet into. In the early stage what looks like a sensible solution would turn out to be the most dreaded one. Avoid paying the minimum amount and try to settle your dues before the last date. 

The minimum payment on the debt by credit card is calculated as a preset percentage (%) of your current outstanding. The minimum down payment for your balance is paid, but thanks to the procedure of the composition, you will be paying for a long period of time. Use our calculator and work out the amount of interest that will be paid by you during your lifetime.

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