You have two credit cards.
Card Name (APR %) Existing Balance Credit Limit
Murk (5.6%) $675.49 $1,500.00
Mini (9.85%) $902.43 $1,000.00
What is your debt ratio? If you budget $375 to payoff your credit card debt and you payoff the highest interest card first while maintaining the interest accrued on the other card, how many months does it take you to pay it off and how much is the payment each time excluding the last payment?
To calculate the debt ratio, we need to find the total balance and total credit limit from both credit cards:
Total Balance = $675.49 + $902.43 = $1,577.92
Total Credit Limit = $1,500.00 + $1,000.00 = $2,500.00
Debt Ratio = (Total Balance / Total Credit Limit) x 100
Debt Ratio = ($1,577.92 / $2,500.00) x 100
Debt Ratio = 63.12%
So, your debt ratio is 63.12%.
To pay off the credit card debt, you will first pay off the card with the highest interest rate, which is the Mini card. You budget $375 to pay off your credit card debt.
1. Paying off Mini card:
Remaining balance on Mini card = $902.43 - $375 = $527.43
Monthly interest on Murk card = ($675.49 x 5.6%) / 12 = $2.98
2. Paying off Murk card:
Remaining balance on Murk card = $675.49 - $2.98 = $672.51
Monthly payment on Murk card = $375 - $2.98 = $372.02
To calculate how many months it will take to pay off the credit card debt, we need to divide the remaining balance by the monthly payment:
Months to pay off remaining balance = $672.51 / $372.02
Months to pay off remaining balance ≈ 1.81
Therefore, it will take approximately 2 months to pay off the remaining credit card debt, and the monthly payment each time excluding the last payment will be $372.02.