# Most credit cards require that you pay a minimum monthly payment of two percent of the balance. Based upon a balance of \$5,270.00, what would be the minimum monthly payment?

Credit Card Debt Analysis Report

Introduction: Credit card debt is a reality for many individuals in today’s world. Large amounts can be easily accumulated due to easy credit access and convenience with credit cards. This report will examine the monthly minimum payment, principal, interest and principal amount of a \$5,270.00 credit card balance with an APR of 15.53 percent. The terms and additional fees credit card companies charge to account accounts will be examined. Finally, we’ll provide guidance on how to use credit cards as well as the charges they charge for young adults who want to get a credit card.

Minimum Monthly Payment: Many credit cards have a requirement that you make a minimum payment every month of 2 percent of your balance. The minimum monthly payment for a \$5270.00 account would be \$105.40 (\$5,270×0.02).

The principal amount and interest: First, find out the total interest paid for the calendar year. This would give us \$817.22 in total interest (5.270 x 0.1553). The amount of interest applied to the minimum monthly payment would be \$8.57 (817.22 / 12) and the amount applied to the principal would be \$96.83 (105.40 – 8.57).

Credit Card Analysis: Let’s say you have a \$8000 balance on your credit card. The minimum monthly payment will be \$160.00 (8000 x 0.022). The amount of interest applied to the minimum monthly payment would be \$13.44 (80.00 x 0.1675) and the amount applied to the principal would be \$146.56 (160.00 – 13.44).

Use an online calculator such as the one found here http://www.bankrate.com/calculators/managing-debt/minimum-payment-calculator.aspxIf I made only the minimum payment, the total time to repay the debt would be 38 months. You could pay more or consolidate your debt to get the debt paid off faster. In order to repay the debt within 24 months, it would take me approximately \$106.79 per year. That would amount to 42%.

A young adult who is considering a credit card should be aware of the fees and terms involved. It’s important to make payments on time to avoid late fees, and to pay more than the minimum payment to reduce the amount of interest paid and pay off the debt sooner. It’s also important to not use credit cards to purchase things that are beyond your means or that you can’t afford to pay off quickly. It’s important to understand that credit card debt can quickly accumulate and become overwhelming if not managed properly.

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