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Credit Card payment calculation - is there any way to do this?

post #1 of 12
7/13/10 at 5:24pm
Thread Starter 
I have a credit card with $2329.55 on it at 9.99%. I've been paying 10% of the balance each month.

As the debt gets smaller, the 10% would continue on until I'd be forced to pay $10 for the monthly minimum most require. Just to satisfy my curiosity, is there a way to calculate amortization based on paying 10%/month, factoring in 9.99% APR? I'm wondering how long this process would actually take.

Preferably with an online calculator as, I don't even own a calculator anymore. The usual debt calculators I use are based on paying a set amount each month rather than a percentage.
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post #2 of 12
7/13/10 at 5:28pm
Unless you're a very savvy investor, you should probably just pay off the 2k instead of wasting your time.
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post #3 of 12
7/13/10 at 5:31pm
Thread Starter 
Oh, I'm not planning to stick to 10%/month, that's just been my baseline for a while (this was a very high card at the outset of my debt reduction lifestyle changes). I'll hopefully have this one paid off with the next round of Ebay auctions.

I've just become curious how long the process would take sticking to 10%.
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post #4 of 12
7/13/10 at 5:37pm
This sounds like it might do the trick.
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post #5 of 12
7/13/10 at 5:38pm
The problem is that because you're never paying it all the way off, you never actually pay it all the way off. You will get to a point where your payments are trivial and the amount is pretty low but you're sort of "asymptoting" towards zero balance without ever actually getting there. Where that crosses your "minimum balance" fee kicker, I have no idea. Here's four years of calculations, provided I did this right:
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post #6 of 12
7/13/10 at 5:41pm
nvm

Douglas ninja edited my post into irrelevance.
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post #7 of 12
7/13/10 at 5:43pm
57-58 months.
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post #8 of 12
7/13/10 at 5:44pm
Thread Starter 
Awesome, thanks.

3 years, 8 months.
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post #9 of 12
7/13/10 at 5:48pm
Quote:
Originally Posted by MrG View Post
nvm

Douglas ninja edited my post into irrelevance.

I had to ninja edit because i screwed up the spreadsheet first time around. had 18% payments instead of 10 somehow. Whoopsie.
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post #10 of 12
7/13/10 at 5:52pm
Quote:
Originally Posted by milosz View Post
As the debt gets smaller, the 10% would continue on until I'd be forced to pay $10 for the monthly minimum most require. Just to satisfy my curiosity, is there a way to calculate amortization based on paying 10%/month, factoring in 9.99% APR? I'm wondering how long this process would actually take.

Paying off debt provides a decent return. Pay down your credit card and you're making a 10% return right there. To make a 10% return any other way, you'd need to make 20% gross (You're starting at -10% return with your CC debt).

(Am I right there?? Never took economics )
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post #11 of 12
7/13/10 at 6:22pm
Quote:
Originally Posted by Douglas View Post
I had to ninja edit because i screwed up the spreadsheet first time around. had 18% payments instead of 10 somehow. Whoopsie.

Gotcha. My post wasn't particularly insightful (they rarely are), so losing it was no big loss to SF.

Quote:
Originally Posted by v0rtex View Post
Paying off debt provides a decent return. Pay down your credit card and you're making a 10% return right there. To make a 10% return any other way, you'd need to make 20% gross (You're starting at -10% return with your CC debt).

(Am I right there?? Never took economics )

You can't really frame debt repayment as providing a return. It's really just reducing losses. You're paying it down now in hopes of not allowing interest to accrue and increase the principal you'll owe down the line.

In terns of the the 20% gross you're on the right track, but incorrect on the number. In the strictest financial terms, you should make the investment if it is guaranteed to return at a rate greater than your interest rate. I.e. if the interest rate is 10% you need to return 10%+xx for it to be a net gain. Any return at 10% or lower isn't worth it. There's no need to specify 20%. You also have to note that credit cards are APR and not simple interest, so you'd have to return 10% annually on your investment, and not just 10% of the total amount that would have otherwise been used for debt repayment.

There are other factors that could be considered as well, but the above is a pretty fair simple analysis of the concept of debt payment vs. investment.
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post #12 of 12
7/13/10 at 6:39pm
Quote:
Originally Posted by Douglas View Post
The problem is that because you're never paying it all the way off, you never actually pay it all the way off. You will get to a point where your payments are trivial and the amount is pretty low but you're sort of "asymptoting" towards zero balance without ever actually getting there. Where that crosses your "minimum balance" fee kicker, I have no idea.

Here's four years of calculations, provided I did this right:


There is probably a $10 minimum payment (maybe you confused this with the minimum balance fee).
My credit card has to be paid at least $10 every month where the balnance is >0 but <1000 (maybe be a rounded 10% after that). This means that at month 34, he would start paying more than 10% of the outstanding balance and eventually be paid off.
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