Financial Education: Charge It Right

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Paying Your Credit Card Bill

If you are approved for credit, the credit card company or issuer will set a credit limit. This is the maximum balance you can carry on your card. Each card issuer has its own standards for setting credit limits.

With a credit card, you have to pay at least the minimum amount due.

The example below shows what happens if you make only minimum payments on your credit card bill.

Item Price APR Interest Paid How Much
You Really Pay
Total Years
to Pay Off
TV $500 18% $439 $939 8
Computer $1,000 18% $1,899 $2,899 19
Furniture $2,500 18% $6,281 $8,781 34
*This chart assumes you are not making additional purchases and you are making your payments on time.

The table below shows how much you can save by paying more than the minimum payment.

Original
Balance
APR Monthly
Payments
Total Number
of Monthly
Payments
Total
Years to
Pay Off
Total of
Payments
$2,500 18% Minimum Pmt 404 34 $8,781
$2,500 18% $50 94 8 $4,698
$2,500 18% $100 32 3 $3,163
*This chart assumes you are not making additional purchases and you are making your payments on time.

You can see why it is a good idea to pay more than the minimum each month. Of course, the best way to save money and avoid paying interest charges is to pay off your balance in full when you first get your bill.

Obviously it is important to pay your credit card bill, but how will you know if your bill is accurate? Let's review a credit card statement and learn how to keep good records.

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