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About Credit Card Payments

How Credit Card Interest Works

Credit cards charge interest on unpaid balances. The APR (Annual Percentage Rate) is divided by 12 to get your monthly interest rate. Interest is calculated daily and compounds, making it expensive to carry a balance.

Understanding Minimum Payments

Minimum payments are typically 2-3% of your balance or $25-35, whichever is greater. Paying only the minimum extends your payoff time significantly and maximizes interest charges.

Tips to Reduce Credit Card Debt

• Pay more than the minimum whenever possible
• Focus on high-interest cards first (avalanche method)
• Consider balance transfer cards with 0% intro APR
• Stop using the card until the balance is paid off
• Set up automatic payments to avoid late fees
• Negotiate a lower APR with your card issuer

Credit Utilization and Your Score

Your credit utilization ratio (balance ÷ credit limit) significantly impacts your credit score. Aim to keep utilization below 30%, ideally below 10%, for the best credit score.

When to Consider Balance Transfers

Balance transfer cards offer 0% APR for 12-21 months, which can save significant interest. However, watch for balance transfer fees (typically 3-5%) and ensure you can pay off the balance before the promotional period ends.