Say if u had a credit card balance of five hundred dollars and paid only the minimum monthly amount, the actual amount u paid 4 that five hundred would be way higher?
WOuld this be true?
Absolutely true.
When you don't pay off the full amount each month, what you owe is like a loan; it has a finance charge to carry the balance.
Sra
Yes, it is true that if you have a credit card balance of five hundred dollars and choose to pay only the minimum monthly amount, you will end up paying a higher amount in total. This is primarily due to the interest charges applied to the remaining balance.
To explain how this works, let's consider the factors involved:
1. Credit card interest rate: Credit cards usually have an annual interest rate, commonly referred to as the Annual Percentage Rate (APR). This rate is typically expressed as a percentage.
2. Minimum monthly payment: Credit card issuers generally require you to pay a minimum amount each month, usually a small percentage of the outstanding balance or a specific fixed amount, whichever is higher.
When you make only the minimum monthly payment, a portion of your payment goes towards paying off the interest charges accrued on your balance, while the remaining amount is applied towards reducing the principal balance.
Since the interest is charged on the remaining balance, the total interest you will pay over time will increase as you prolong the repayment period. This results in a higher overall cost to repay the five hundred dollars.
To minimize the amount of interest paid, it is generally advisable to pay more than the minimum monthly payment or ideally, pay off the entire balance in full. By doing so, you can save money and reduce the time it takes to become debt-free.