What are the typical repayment plans for Credit Cards in the United States?
"In the U.S., when you receive your credit card bill each month there's a ""minimum payment amount."" That minimum payment is usually the greater of $25 or 1% of the new balance on the card plus new interest and fees. As long as you pay the minimum payment amount, you can pay as much as you want each month. Note, in your example, you would be required to pay more than $1000 to pay off the balance, as interest would accrue each month on the unpaid principal. How much more is dependent on the interest rate of the card." "It is called ""Credit card installments"" or ""Equal pay installments"", and I am not aware of them being widely used in the USA. While in other countries they are supported by banks directly (right?), in US you may find this option only in some big stores like home improvement stores, car dealerships, cell phone operators (so that you can buy a new phone) etc. Some stores allow 0% financing for, say, 12 months which is not exactly the same as installments but close, if you have discipline to pay $250 each month and not wait for 12 months to end. Splitting the big payment in parts means that the seller gets money in parts as well, and it adds risks of customer default, introduces debt collection possibility etc. That's why it's usually up to the merchants to support it - bank does not care in this case, from the bank point of view the store just charges the same card another $250 every month. In other countries banks support this option directly, I think, taking over or dividing the risk with the merchants. This has not happened in US. There is a company SplitIt which automates installments if stores want to support it but again, it means stores need to agree to it. Here is a simple article describing how credit cards work: https://www.usbank.com/credit-cards/how-credit-cards-work.html In general, if you move to US, you are unlikely to be able to get a regular credit card because you will not have any ""credit history"" which is a system designed to track each customer ability to get & pay off debt. The easiest way to build the history - request ""secured credit card"", which means you have to give the bank money up front and then they will give you a credit card with a credit limit equal to that amount. It's like a ""practice credit card"". You use it for 6-12 months and the bank will report your usage to credit bureaus, establishing your ""credit score"". After that you should be able to get your money back and convert your secured card into a regular credit card. Credit history can be also built by paying rent and utilities but that requires companies who collect money to report the payments to credit bureaus and very few do that. As anything else in US, there are some businesses which help to solve this problem for extra money."
"Without knowing what the balances are, I associate ""uncomfortable"" with high, as in tens of thousands.   What I would do: is 1) cut up the cards and stop using them, and 2) have some balance transfer offers in hand the next time you call to negotiate with the companies.  Essentially, you will have to convince them that they will have to explain one of two things to their boss: why they lowered your rate or why you left. They can collect less interest from you or no interest from you.  It's up to them.  If they don't offer you something that's in the ballpark of your balance transfer offer, then bid them goodbye and complete the balance transfer. As far as paying them off, the top two modes of repayment are lowest balance first (aka snowball) or high interest rate first.  Both methods are similar in that you pay minimums on all but the method's focus point.  Whether it is lowest balance or highest interest rate, you pay ALL of your extra money on the lowest balance or the highest interest debt until it is gone and then you move onto the next one in the list. For what it's worth, I prefer the lowest balance method, you see progress faster." Hi guys, have a question from my uni finance course but I’m unsure how to treat the initial loan (as a bond, or a bill or other, and what the face value of the loan is).  I’ll post the question below, any help is appreciated.  “Hi guys, I have a difficult university finance question that’s really been stressing me out....  “The amount borrowed is $300 million and the term of the debt credit facility is six years from today  The facility requires minimum loan repayments of $9 million in each financial year except for the first year.  The nominal rate for this form of debt is 5%. This intestest rate is compounded monthly and is fixed from the date the facility was initiated.  Assume that a debt repayment of $10 million is payed on 31 August 2018 and $9million on April 30 2019. Following on monthly repayments of $9 million at the end of each month from May 31 2019 to June 30 2021.  Given this information determine the outstanding value of the debt credit facility on the maturity date.”  Can anyone help me out with the answer? I’ve been wracking my brain trying to decide if I treat it as a bond or a bill.”  Thanks in advance, "I too am a full-monthly-statement-balance payer and I received a balance transfer offer from my credit-card company. This one was quite different from many others that I have read about on this forum. I could do a balance transfer for any amount up to $X from another credit card, or use the enclosed ""checks"" to pay  some other (non-credit-card) bills, and I would not have to pay any interest for 12 months on the amount thus borrowed.  But, There would be a 2% service charge on the amount I was borrowing. This amount would be billed on the next monthly statement, and it would have to be paid in full by the due date of that month's payment, that is, within the 25-day grace period allowed for payment of monthly statements. Else, interest would start being charged on the unpaid part of the service charge at the usual humongous rate of H% per month. If I had not paid the previous month's balance in full, I would be charged interest at H% per month on the service charge starting from Day One; no free ride till the due date of the next month's statement. Of course, the balance carried over from last month would also be charged interest at H%. If I had paid last month's bill in full, but there were any other charges (purchases) during the current month, then  unless the entire amount due, this month's purchases plus service charge and that ""interest-free-for-twelve-months loan""  balance was paid off within the 25-day grace period, my purchases would be deemed unpaid and would start being charged interest. In short, the only way to avoid paying interest on the amount borrowed was to start with a card showing a $0 balance due on the previous month's statement, not make any charges on that card for a whole year, and pay off that 2% service charge within the grace period. It might also have required that one-twelfth of that interest-free loan be repaid each month, but  I had stopped reading the offer at this point and filed it in the round circular file. In short, while @JoeTaxpayer's tale of how ""As a pay-in-full user, I've used the zero rate to throw $20K at the 5.25% mortgage"" is undoubtedly how things worked once, it is not at all clear that they still work that way. At least, they don't work that way for me.  Heck, once upon a time, for a period of about 3 months, you could earn 1.5% interest per month from the credit card company by overpaying your credit card bill considerably. Their computers then just ""added on"" 1.5% interest by multiplying your credit balance -$X by 1.015 and so you got 1.5% per month interest from the credit card company. The credit card agreements (and the software!) got changed in a hurry, and nowdays all credit-card agreements state in the fine print that if you overpay your bill, you don't earn any interest on the overpayment." "Basically, your CC is (if normal) compounded monthly, based on a yearly APR. To calculate the amount of interest you'd pay on each of these accounts in a year, pull up a spreadsheet like Office Excel. Put in your current balance, then multiply it by the annual interest rate divided by 12, and add that quantity to the balance. Subtract any payment you make, and the result is your new balance. You can project this out for several months to get a good estimate of what you'll pay; in accounting or finance terms, what you're creating is an ""amortization table"". So, with a $10,000 balance, at 13.99% interest and making payments of $200/mo, the amortization table for one year's payments might look like: As you can see, $200 isn't paying down this card very quickly. In one year, you will have paid $2,400, of which $1,332.25 went straight into the bank's pockets in interest charges, reducing your balance by only $1,067.75. Up the payments to $300/mo, and in 1 year you will have paid $3,600, and only been charged $1,252.24 in interest, so you'll have reduced your balance by $2,347.76 to only $7,652.24, which further reduces interest charges down the line. You can track the differences in the Excel sheet and play ""what-ifs"" very easily to see the ramifications of spending your $5,000 in various ways. Understand that although, for instance, 13.99% may be your base interest rate, if the account has become delinquent, or you made any cash advances or balance transfers, higher or lower interest rates may be charged on a portion of the balance or the entire balance, depending on what's going on with your account; a balance transfer may get 0% interest for a year, then 19.99% interest after that if not paid off. Cash advances are ALWAYS charged at exorbitantly high rates, up to 40% APR.  Most credit card bills will include what may be called an ""effective APR"", which is a weighted average APR of all the various sub-balances of your account and the interest rates they currently have. Understand that your payment first pays off interest accrued during the past cycle, then pays down the principal on the highest-interest portion of the balance first, so if you have made a balance transfer to another card and are using that card for purchases, the only way to avoid interest on the transfer at the post-incentive rates is to pay off the ENTIRE balance in a year. The minimum payment on a credit card USED to be just the amount of accrued interest or sometimes even less; if you paid only the minimum payment, the balance would never decrease (and may increase). In the wake of the 2008 credit crisis, most banks now enforce a higher minimum payment such that you would pay off the balance in between 3 and 5 years by making only minimum payments. This isn't strictly required AFAIK, but because banks ARE required by the CARD Act to disclose the payoff period at the minimum payment (which would be ""never"" under most previous policies), the higher minimum payments give cardholders hope that as long as they make the minimum payments and don't charge any more to the card, they will get back to zero." "I'm not going to recommend a specific card.  New card offers pop up all the time.  My answer would be out of date in a month! As a general rule, if you pay off your balance every month, you should be looking at a cash-back or a rewards card. Cash-back cards will give you some money (say 1%) of every dollar you spend.  Some will give you larger amounts of cash-back for certain types of spending (e.g. groceries). With a Rewards card, you usually get ""points"" or ""airline miles"", which can be redeemed for merchandise, flights around the wold, concert tickets, etc. With these types of cards, it makes sense to do as much of your spending as possible with the cards, so you can maximize the benefits. Which specific card is best will depend on your shopping habits, and which bank is offering the best deal that week.  I recommend you start at http://www.creditcards.com to compare card offerings.  For cash-back cards, you can also go to http://www.creditcardtuneup.com, enter some details of your spending, and see which one will give you the most cash back." "Your companies are declining to lower your rates because you are describing it as being kind. When I was in a similar situation, I called each one, starting with the highest rate, and said this: For the last little while things have been tight and my balances have crept up on all my cards. Now I'm about to start a fairly dramatic paydown. I'm going to be doing highest-rate fastest, which is you. Are you able to lower my rate so that you can continue to collect it?  Some said no. Some said ""ask again when you've paid more than the minimum three months in a row."" Most said yes, and sometimes by a dramatic amount. It made a real difference to getting things under control. I agree with the other answers that $50 extra on each card is just not as fulfilling as putting all the extra to a single card. If you must still use a card (to put gas in your car, buy groceries etc) getting one card to zero will return you to not paying interest even when you use it, so you might want to start with your lowest balance and then go to highest-rate once you have one clear one you can use. (If your balances are all so high that it will take a year or more to get one to zero, then maybe not. But if one is low drive it down first.) As for the consolidation loan, for some people it's the key to saving interest and getting the debt behind them. For others it's a chance to catch their breath and run up even more debt. Most people cannot predict in advance which they will be or which others will be. Be aware that it is a risk. You can vow that you will never again cover payroll with a cash advance from the company credit card (or your personal one) but when push comes to shove, you just might anyway." yeah... no track record.  Here's what I'm predicting:  PayPal-like policies designed to keep money in limbo (aka a float operation).  Personally, I'm surprised that Visa, Mastercard, et. al. haven't applied Dodd-frank transaction fee limits to prevent square from inserting itself between the consumer and creditor. Forget about terms.  Think about loans in terms of months.  To simplify things, let's consider a $1000 loan with .3% interest per month.   This looks like a ten month term, but it's equally reasonable to think about it on a month-to-month basis.  In the first month, you borrowed $1000 and accrued $3 interest.  With the $102 payment, that leaves $901 which you borrow for another month.  So on and so forth.   The payoff after five payments would by $503.54 ($502.03 principal plus $1.51 interest).  You'd save $2.99 in interest after paying $13.54.  The reason why most of the interest was already paid is that you already did most of the borrowing.  You borrowed $502.03 for six months and about $100 each for five, four, three, two, and one month.  So you borrowed about $4500 months (you borrowed $1000 for the first month, $901 for the second month, etc.).  The total for a ten month $1000 loan is about $5500 months of borrowing.  So you've done 9/11 of the borrowing.  It's unsurprising that you've paid about 9/11 of the interest.   If you did this as a six month loan instead, then the payments look different.  Say  You borrow $1000 for one month.  Then 834 for one month.  So on and so forth.  Adding that together, you get about $168.50 * 21 or $3538.50 months borrowed.  Since you only borrow about 7/9 as much, you should pay 7/9 the interest.  And if we adding things up, we get $10.54 in interest, about 7/9 of $13.54.   That's how I would expect your mortgage to work in the United States (and I'd expect it to be similar elsewhere).  Mortgages are pretty straight-jacketed by federal and state regulations.   I too once had a car loan that claimed that early payment didn't matter.  But to get rid of the loan, I made extra payments.  And they ended up crediting me with an early release.  In fact, they rebated part of my last payment.  I saved several hundred dollars through the early release.  Perhaps your loan did not work the same way.  Perhaps it did.  But in any case, mortgages don't generally work like you describe. I have a job and would like to buy equipment for producing music at home and it would be easier for me to pay for the equipment monthly I just want to address your contention that it would be easier to pay monthly, with an interest calculation.  Lets say you get a credit card with a very reasonable rate of 12% and you buy $2,500 of equipment.  A typical credit card minimum payment is interest charges + 1% of the principle. You can see how this is going.  You've paid nearly $200 to clear about $100 off your principle.  Obviously paying the minimum payment will take forever to wipe out this debt.  So you pay more, or maybe you get 0% interest for a while and take advantage of that. Paying $100 per month against $2,500 at 12% per year will take 29 months and cost about $390 in interest.  At $200 per month it'll take 14 months and cost $184 in interest.  Also note, you'll probably get an interest rate closer to 16 or 17%. It's always easier to pay small amounts frequently than it is to pay a lot of money all at once, that ease has a cost.  If you're buying the gear to start a little business, or you already have a little business going and want to upgrade some gear, great; disciplined debt handling is a wonderful skill to have in business.  If you want to start yourself in to a new hobby, you should not do that with debt.  If interest rates are low enough financing something can make sense.  0.9% apr on a car, sure; 15% apr on a mixing board, no.  Credit card interest rates are significant and really should not be trifled with. "These days, just about any bank has the ability to schedule payments for free.  I usually use this.  My wife has a Chase MasterCard, because they used to automatically credit the 1% cash back monthly.  Now they ""improved"" the card, and you need to go online and redeem the rewards, either in $20 increments, or to pay off a previous purchase, which seems to be a real gimmick.  They probably get back the 1% cash back for that purchase if you use this feature.  Weird people." Remember that if you make charges as the starting of your billing cycle, then you are receiving a free ~60-day loan. For those that are able to receive high interest rates on their, this means a greater opportunity to earn on their money. For example: Your billing statement ends on Jan 5th. On Jan 6th, you max out your credit card. Your billing statement ends on Feb 5th. Depending on your credit card, your grace period can be anywhere from 20 to 30 days. If your bill is due Mar 7th, you just gave yourself a free 60 day loan. If you have multiple credit cards with different due dates and long grace periods, you can rotate which cards you max out to optimize the money you keep in savings. "Credit Cards typically charge interest on money you borrow from them.  They work in one of two ways. Most cards will not charge you any interest if you pay the balance in full each month.  You typically have around 25 days (the ""grace period"") to pay that off.  If that's the case, then you will use your credit card without any cost to yourself. However, if you do not pay it in full by that point, then you will owe 19.9% interest on the balance, typically from the day you charged the payment (so, retroactively).  You'll also immediately begin owing interest on anything else you charge - typically, even if you do then pay the next month the entire balance on time.  It's typically a ""daily"" rate, which means that the annual rate (APR) is divided into its daily rate (think the APR divided by 365 - though it's a bit different than that, since it's the rate which would be 19.9% annualized when you realize interest is paid on interest).   Say in your case it's 0.05% daily - that means, each day, 0.05% is added to your balance due.  If you charged $1000 on day one and never made a payment (but never had to - ignore penalties here), you'd owe $1199 at the end of the year, paying $199 interest (19.9*1000). Note that your interest is calculated on the daily balance, not on your actual credit limit - if you only charge $100, you'd owe $19.90 interest, not $199. Also note that this simplifies what they're actually doing.  They often use things like ""average daily balance"" calculations and such to work out actual interest charged; they tend to be similar to what I'm describing, but usually favor the bank a bit (or, are simpler to calculate). Finally: some credit cards do not have a grace period.  In the US, most do, but not all; in other countries it may be less common.  Some simply charge you interest from day one. As far as ""Standard Purchases"", that means buying services or goods.  Using your credit card for cash advances (i.e., receiving cash from an ATM), using those checks they mail you, or for cash-like purchases (for example, at a casino), are often under a different scheme; they may have the same rate, or a different rate.  They likely incur interest from the moment cash is produced (no grace period), and they may involve additional fees.  Never use cash advances unless you absolutely cannot avoid it." "Not everyone pays their balance in full every month. They may not make interest off of you or me but they do make interest off of a lot of cardholders. In many cases, the interest is variable and the larger your (running) balance, the higher your rate. If you're close to your limit and making minimum payments, you can literally take decades to pay off $2,000 or so.  Some people don't pay at all every month and end up paying late fees. Some people use their cards overseas and pay foreign transaction fees. Ever take a cash advance? Me neither but they charge you interest right away for that instead of waiting until your statement. The list of fees and charges is as long as my arm and in tiny print. That's how they make money. The points/bonus/cash back and other rewards programs are to get you in the door. It's like when you see a luxury car advertised for a ""too good to be true"" price and you get to the lot and find out that the one they are selling for that price is a manual transmission without AC or a radio, they only had one and they sold it an hour before you got there. It got you on the lot though. The rewards programs function in much the same way (minus the disappearing part), they get you interested in their offering among a sea of virtually identical products but rest assured, if the card issuers were losing money because of them, they wouldn't exist for very long." "A credit card is basically a ""revolving"" loan, in which you're allowed to borrow up to a certain amount (the limit), and any time you borrow, you pay interest.  If you were to *borrow* $100 to pay for something via a credit card, you'd have a $100 balance on the card. If you then pay $70 cash to the card, there would be $30 remaining.  That $30 balance could accrue interest. The timing of that interest charge could vary. The 20% you've quoted is almost certainly ""APR,"" of which the ""A"" stands for ""annual,"" so that 20% would be an annual rate.  It makes the most sense, mind you, to keep a minimal balance on a credit card, as the interest rate is higher than most other loans." One important answer is still missing: governments may not be able to do print money because of international agreements. This is in fact a very important reason: it applies to the entire Eurozone.  (I admit that many Eurozone countries also not allowed to borrow as much as they do now, but somehow that's considered a far lesser sin).