Online financial calculator for calculating the minimum monthly payment by credit card. Enter the amount of the credit limit on the credit card and the calculator will automatically calculate the required minimum payment.
A credit card is a small plastic card issued by a bank, business, or other organization, allowing the holder to make purchases or withdrawals on credit, which is a form of unsecured loan from the issuer. There is a maximum amount of credit that a card can provide, called a credit limit, which should not be surpassed. Exceeding the limit may require the credit card holder to pay a credit limit fee. At the end of the month, the credit card holder can choose to repay the entire amount or leave an unpaid balance that is subject to interest until it is paid off. Note that credit card interest rates tend to be relatively high compared to other common loans such as mortgages, car loans, or student loans, and as such, the balance should ideally be paid off monthly to avoid paying large amounts of interest. Examples of credit card issuers include banks, credit unions, or retailers, and examples of credit card networks include Visa or MasterCard. American Express and Discover are both issuers and networks. Networks charge a small fee (<3%) for handling the processing of the transactions. Issuers profit from interest payments on revolving balances, late fees, annual membership fees, fees for cash withdrawals, interchange fees, etc.
Different cards offer varying rates of interest, often referred to as the annual percentage rate, or APR. Some cards have variable APRs, based on specific indexes, and others have fixed APRs. There are some credit cards that are specifically advertised as having a zero, introductory, annual percentage rate (APR).
It is possible to withdraw credit from a credit card for physical cash. This is called a cash advance, and they usually have very high APRs. There is no grace period as interest accumulates immediately, cash advances don't count towards rewards, and there is usually a cash advance fee. On top of that, the ATM used will probably also charge a fee. Normally, credit card cash advances are not very advantageous, and should generally be reserved for emergencies.
It is possible to transfer the balance from one credit card to another. People who carry revolving credit month-to-month can probably consider applying for a favorable balance-transfer credit card, usually in the form of one with a low or zero introductory rate. For instance, a spender who has accrued lots of debt on a high-interest rewards credit card may want to apply for a credit card geared for balance transfers, which usually comes with a period of interest-free accumulation of debt. The interest-free period is generally 6-21 months, after which the credit card will require payment of interest on top of the principal. Some cards can charge a fee of 3% or 4% of the total amount transferred. Try to avoid these unless the low or zero interest provides a bigger financial incentive to do so. Balance transfers generally do not count towards rewards or cashback features.
Most people also have debit cards that look and function very similarly to a credit card. Banks or financial institutions provide debit cards with checking accounts, which allow purchases or withdrawals to be made that are deducted directly from the checking account. There is usually no fee associated with debit card purchases or withdrawals except under certain circumstances such as use in a foreign country or withdrawals from third-party ATMs.
Types of Credit Cards
Different types of credit cards suit the needs of different types of spenders. For simplicity, it would be wise to find one that aligns best with the user's financial intentions; for instance, a person who is not an extravagant spender and not interested in anything except getting the best bang for their buck can probably live with just a no-fee cash back card. However, it is very possible for people to carry multiple credit cards for their different advantages, even if it requires a bit of management. What's important is that they are all paid off in a timely manner.
Cashback: These offer cashback on all purchases, usually 1%, 1.5%, or 2%. Another type may have up to 5% cashback on selected categories of merchandise or services, which normally rotate quarterly.
Rewards: These make up the bulk of most credit cards. The types of rewards usually range between airline miles, hotel bookings, and dining benefits. Credit cards that offer more rewards or miles will generally require annual fees, and it is up to each spender to evaluate their spending habits to decide whether a no- or low-fee card with low rewards is preferable to a high-fee card with high rewards.
Charge: These usually work the same way as any other credit card, except that they have either no spending limits or very high limits, and balances cannot be rolled over from one month to the next. It is expected for the holder to pay the balance in full at the end of every month. The only real benefit of having one is the heavy spending a charge card allows; just make sure to pay it in full at the end of every month.
Balance Transfer: These are best for spenders who plan on carrying lots of credit card debt in the future because the interest rates on credit cards are quite high. It is possible to transfer an existing balance from one credit card to another. Unlike most credit cards, some carry low, or even zero, introductory APRs for the first 6-21 months, which allows the holder to effectively roll debt from one card to another without paying interest. Balance transfer credit cards are typically more useful for people who have significant amounts of existing debt on high APR cards.
Secured: Secured credit cards are useful for younger people with no credit history who are interested in getting started or people with bad credit history. To be issued a secured credit card, the applicant must make a security deposit that acts as collateral; if they prove to be financially responsible with the secured credit card and no longer wish to use it (as there are many other credit cards on the market to be had that do not require a security deposit after the requisite credit score), they can close the account and receive their deposit back.
Prepaid: A prepaid credit card is more akin to a debit card in that it is preloaded with an amount to be used, and cannot exceed this amount. In general, there are reloadable cards, multi-use cards, and single-use cards. These are often given as gifts or mailed back from companies as compensation for rebates on their purchased goods.
Store: Some retail stores issue credit cards that offer big discounts only at that particular chain. They are usually offered at department stores by a cashier during checkout and packaged with a discount like 10% on the sum of purchases. These tend to be more useful for users that shop at the stores frequently enough to warrant their financial benefits. They also make good options for people with bad credit looking to rebuild because they often accept lower credit scores relative to other credit cards. However, interest rates on store credit cards are generally higher than other types of credit cards.
Business: There are some cards geared to help benefit business needs. They offer things such as discounts on products and services for the business, intricate ways to help track expenses, emergency travel assistance, medical assistance, and travel agent services. Business credit cards are useful for separating personal expenses from business expenses when it comes time to do taxes.