Every month when you receive your credit card statements, do you really read the statements carefully and find out how the outstanding balances are calculated? Besides, do you really know how long you need to take to pay off all your credit card debts if you only make minimum payment monthly? Furthermore, are you aware of how much additional cost you are required to bear due to the high interest rates, late fees, annual fees and other finance charges?

Let me show you some useful tips which are able to assist you to calculate your cost

Step 1: List down every individual credit card debt

I am sure you have multiple credit cards. In order to calculate your month cost accurately, you are required to list down the details of your outstanding balances, such as the total amount, the interest rates and the average monthly payments. However, you don’t need to record your account numbers, payment terms and name of lenders because these will not affect your monthly cost at all. You just need to work out an easy-to-understand summary so that you can start dealing with your debt in an easier manner.

Step 2: Split your credit card debt into 2 parts

In order to find out your monthly cost, you are required to separate your outstanding balances into 2 portions, i.e. the principal and the interest rate. You just need to practice some simple calculations. In order to find out how much money you need to spend for interest, just multiply the annual percentage rate to your principal and then divide by 12 months. By doing so, you are able to know how much you need to contribute just for interest.

If you want to know your daily cost, just break down the monthly interest paid by 30 days. For instance, if you are paying $50 per day just to finance your credit card debt, it means a lot to you. You need to think of other ways to raise more cash to pay off your principal at a faster pace so that you don’t need to bear so much interest.

If you can’t obtain so much cash within a short period, then you are advised to negotiate with your credit card providers to reduce your interest rates or you need to do balance transfer as soon as possible.

Last but not the least; the 2 steps above do not include late fee charges, over-the-limit fees and annual fees. If you always make your payment late or you always swipe your cards exceeding your credit limit, you are reminded to include these additional costs. Your monthly cost will definitely be increased.

To sum up, in order to get rid of your credit card debt successfully, you need to figure out your monthly cost first so that you can work out a more realistic budget to resolve your problem. You must be fully aware of the scope of your debt.

Don’t just make your payment monthly without thinking further. Without proper planning, you will end up paying your outstanding balances for more than 20 years.

If you want to calculate how much you need to pay off your credit card debt – use the credit card payment calculator.