Minimum Monthly Payment

Categories: Banking, Mortgage

You get your credit card bill. You sadly have $11,238 on it. You can't pay it all off this month. You can't even pay off a grand of it. So you pay the 2% per month interest of $224-ish, and then you have an additional principal balance payment that the credit card company demands you pay or they cut off your credit, do horrible things to your credit score, and harass you relentlessly to make good on the promise you made originally to pay them back their money.

That minimum payment varies widely among cards and banks, but think: 5% of whatever amount is outstanding. If you charged no more items on that card (and wow, are you now really regretting that sudden trip to Tokyo for a week that cost $9,873), then you'd pay it all off in 20 or so months. Maybe less. So that minimum payment here might be around $740. That is, you'd pay the interest charges plus 5% of the remaining principal, and then, little by little, your interest charges go down as your principal balance reduces in value.

It was expensive, but wow those sumo wrestlers were cool. And you're going straight to Jenny Craig as soon as these bills are paid.

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