Credit card minimum vs paying extra step by step

What is a credit card minimum payment?

The least amount you can pay each month to keep your account in good standing.

Why pay more than the minimum?

Paying more reduces interest charges and debt faster.

True or false: Minimum payments extend your debt duration.

True, because only paying the minimum prolongs repayment time.

Difference between accruing interest and paying principal.

Interest is the cost of borrowing; principal is the original amount borrowed.

Fill in the blank: Paying only the minimum can lead to __________.

Higher long-term costs due to accumulating interest.

How does interest affect minimum payments?

Interest is calculated on the remaining balance, increasing total owed.

What happens if you miss a minimum payment?

You may incur late fees and damage your credit score.

True or false: Paying extra can improve your credit score.

True, because lower balances may lead to better credit utilization.

If you owe $1,000 at 15% interest, what is the minimum payment?

Typically around 2% of the balance, so $20 in this case.

What is compound interest?

Interest calculated on both the initial principal and the accumulated interest.

How to calculate total cost of a credit card?

Include principal and all interest and fees over the repayment period.

Difference between fixed and variable interest rates.

Fixed rates stay the same, while variable rates can change over time.

What is an APR?

Annual Percentage Rate; the yearly interest rate charged on borrowed money.

True or false: The minimum payment is always a percentage of your balance.

False, it can also be a flat fee depending on the card issuer.

Fill in the blank: Paying off your balance in full avoids __________.

Interest charges altogether.

Why is it important to track payments?

To avoid missed payments and manage your financial health effectively.