Average Payment Made on a Credit Card
Author: maverick
Posted: Thu May 04, 2006 9:08 pm
Post subject: Safe payment amount?
I was wondering if there is an opinion of the board members here on what is a safe payment amount to a credit card every month.
My situation is like this: I have about 7K balance on one of my cards and a very low interest rate of 1.99%. The card company asks for $108 every month in minimum payments. I currently pay off about $300 every month. I now want to set aside some money every month for possible future expenses. For this reason, I wanted to decrease the payment I was making every month.
I know that paying just the minimum is not good, and that I should be paying more than that. But I am not sure how much more. I have been paying the above mentioned some for some time now, without any negative move from the credit card company.
Any advice on how much payment is a good idea?
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Author: Polonius
Posted: Thu May 04, 2006 9:25 pm
Post subject: Average Payment Made on a Credit Card
I don't understand your reasoning at all. You're paying 1.99%. You can get 4.5% in a savings account. Why pay more than you have to pay? No bank is going to take adverse action against you in a case like this, since it's obvious why you're paying the minimum. If you want to be "safe", round it up. Pay $150/month instead of $108, or even $200 per month. But $300? Way too much...unless you can just draw it out again without a fee at the same 1.99%, in which case you might want to pay it ALL off every month or every other month and then take it out again.
Author: fire3000
Posted: Fri May 05, 2006 10:24 am
Post subject: Safe Payment Amount
If your credit situation is good, I say go ahead and pay the minimum on low rate cards. Some credit reports like Experian do show the last payment amount or the last 6 payment amounts (all credit reports should show this). Thus if you have a low score and want to show this or other lenders that you can handle the payments easily, pay more than the minimum. The lost interest you can earn by investing the extra money is not much. Two years ago I took out a cash advance of over $66,000 at zero per cent on my MBNA card. I was worried that my other creditors and MBNA would think I was now a high risk due to a very high utilization and debt to income ratio. MBNA wanted a ridiculously low $15 as a minimum payment each month after they charged the 2% initial fee. So I paid $1,000 each month and paid it off in full when the low rate ended.
Author: db619196
Posted: Fri May 05, 2006 11:05 am
Post subject: Average Payment Made on a Credit Card
I agree with Polonius. For now, pay the minimum. The same thing applies to student loans. I used to prepay them like crazy and now I am getting 1% more from Emigrant Direct than I am paying in interest on my loans.
Based on my math, if you pay just the minimum, and put the extra $192 (300 you are paying minus 108 minimum) in an Emigrant Direct savings account, you would make 57 dollars a year (you are effectively clearing 2.5%). Not a whole lot, but for me that is a couple electric bills.
However, I do not know the nature of your 1.99% rate, whether it is an intro rate or what. With 7,000 dollars in debt, if you only pay off $1000 in a year by paying the minimum, you may be left with $6,000 in debt after the rate is jacked up to 13%. Personally, I have a 0% rate on a Discover Card until November that I am doing this with. HOWEVER, I am paying off the card completely in November so that I won't pay a dime of interest. This means that when November comes, the money I saved needs to be there for the payoff. Otherwise, I will quickly lose any interest I made because of an APR in the double digits.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Posted: Thu May 04, 2006 9:08 pm
Post subject: Safe payment amount?
I was wondering if there is an opinion of the board members here on what is a safe payment amount to a credit card every month.
My situation is like this: I have about 7K balance on one of my cards and a very low interest rate of 1.99%. The card company asks for $108 every month in minimum payments. I currently pay off about $300 every month. I now want to set aside some money every month for possible future expenses. For this reason, I wanted to decrease the payment I was making every month.
I know that paying just the minimum is not good, and that I should be paying more than that. But I am not sure how much more. I have been paying the above mentioned some for some time now, without any negative move from the credit card company.
Any advice on how much payment is a good idea?
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Author: Polonius
Posted: Thu May 04, 2006 9:25 pm
Post subject: Average Payment Made on a Credit Card
I don't understand your reasoning at all. You're paying 1.99%. You can get 4.5% in a savings account. Why pay more than you have to pay? No bank is going to take adverse action against you in a case like this, since it's obvious why you're paying the minimum. If you want to be "safe", round it up. Pay $150/month instead of $108, or even $200 per month. But $300? Way too much...unless you can just draw it out again without a fee at the same 1.99%, in which case you might want to pay it ALL off every month or every other month and then take it out again.
Author: fire3000
Posted: Fri May 05, 2006 10:24 am
Post subject: Safe Payment Amount
If your credit situation is good, I say go ahead and pay the minimum on low rate cards. Some credit reports like Experian do show the last payment amount or the last 6 payment amounts (all credit reports should show this). Thus if you have a low score and want to show this or other lenders that you can handle the payments easily, pay more than the minimum. The lost interest you can earn by investing the extra money is not much. Two years ago I took out a cash advance of over $66,000 at zero per cent on my MBNA card. I was worried that my other creditors and MBNA would think I was now a high risk due to a very high utilization and debt to income ratio. MBNA wanted a ridiculously low $15 as a minimum payment each month after they charged the 2% initial fee. So I paid $1,000 each month and paid it off in full when the low rate ended.
Author: db619196
Posted: Fri May 05, 2006 11:05 am
Post subject: Average Payment Made on a Credit Card
I agree with Polonius. For now, pay the minimum. The same thing applies to student loans. I used to prepay them like crazy and now I am getting 1% more from Emigrant Direct than I am paying in interest on my loans.
Based on my math, if you pay just the minimum, and put the extra $192 (300 you are paying minus 108 minimum) in an Emigrant Direct savings account, you would make 57 dollars a year (you are effectively clearing 2.5%). Not a whole lot, but for me that is a couple electric bills.
However, I do not know the nature of your 1.99% rate, whether it is an intro rate or what. With 7,000 dollars in debt, if you only pay off $1000 in a year by paying the minimum, you may be left with $6,000 in debt after the rate is jacked up to 13%. Personally, I have a 0% rate on a Discover Card until November that I am doing this with. HOWEVER, I am paying off the card completely in November so that I won't pay a dime of interest. This means that when November comes, the money I saved needs to be there for the payoff. Otherwise, I will quickly lose any interest I made because of an APR in the double digits.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
posted by CardRatings.com at 3:12 PM
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