Credit Card Amortization Calculator: How to Calculate Your Monthly Amortization Manually
If you have a huge amount of debt or loan and you can resort to amortization in able to resolve this issue. Amortization is a method of slowly paying off debt for a certain period of time. Credit card debt is definitely applicable to this as well. Furthermore, there are two methods of credit card amortization that is followed: the minimum payment method and the constant payment method. However, regardless of which method you use, you would need to stop using the card for new purchases. Do note that the minimum payment though is far more expensive and takes far longer than the constant payment.
In order to calculate the amortization for credit card without using a credit card amortization calculator, you should first gather the information required such as your account balance and current interest rate. Other than that, you also need the percentage of the balance the credit card company uses to determine your minimum payment. Most of this information can be found on your credit card bill.
You can compute the monthly periodic interest rate by dividing the annual interest rate by 12. After that, you can get the monthly interest charge by multiplying the monthly periodic rate by the total balance from the previous month. Next to that is to calculate the monthly payment by multiplying the total balance on the credit card by the percentage used for the account then add any interest charges to the balance and subtract this from the minimum payment.
Using the ending balance as the “previous balance” to compute the next month’s interest and minimum payment, repeat this step for the months it will take to complete the amortization or pay off the debt completely. This is the whole process of the minimum payment method.
Likewise, the constant payment method follows the same procedure except that instead of calculating for each rate per month, it uses a constant amount for the rate. Whatever method you choose, make sure to follow it through and avoid getting into debt ever again. Look into your credit company’s website as well to check if they provide online credit card amortization calculator that would make you task much more easier.