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Hello, with 0% APR, what are the card's minimum payments based on? Balance divided by 12? Balance divided by 36? Different for every account agreement? General industry practice I'm not aware of?
How is this calculated
I believe it varies by bank. There are minimum minimum payments, and also mandated minimum payments. Discover is a minimum of 25 dollars or the balance, whichever is lower. I havent had it high enough to know what percentage of a higher balance is required, im sure its in the tems and conditions somewhere. US bank is 20 or the balance. Im sure if you look thru paperwork you can find the minimum on a higher balance.
its def not balance/12. I have a 0% with around 7k balance and my min payment is less than $100. If i do the math, the min pay is 1.5% roughly.
If you are talking about a 0% intro or BT promotion, the min payment is the same as the regular credit card terms. In other words if your minimum paument for ABC visa is listed in their terms as 2% of the average daily balance (or statement balance) than that's the minimum payment for everything no matter what the APR or promotional terms - UNLESS this is specifired otherwise.
But as a eample say you get a Discover card (10K CL) with 12 month 0% interest promo and 15 months 0% balance tranfers. You buy $1000 in "whatever" and do a balance transfer of $5000 for a statement balance of $6000. General terms call for a minimum payment of 2% per month means you own $120 the first month, $117.60 the next month, $115.25 the next month, etc (saying to don't charge anything else) after 12 payments you'll start paying interest on the "whatever" balance and after 15 total months you'll start payimg interest on the BT balance and that interest will add to the principle of which you'll owe 2% of as a minimum.
Zero percent opening promotions or BT promotions are great "interest free loans" but like any other interest bearing loan, pay attention because minimum payments will leave you a large balance which become much more expensive when the promotion expires.
@pipeguy wrote:Zero percent opening promotions or BT promotions are great "interest free loans" but like any other interest bearing loan, pay attention because minimum payments will leave you a large balance which become much more expensive when the promotion expires.
yep, thanks!
As mentioned above minimum payments are generally the higher of 2% of the remaining balance or $25. If you have high interest cards, you should be very careful with minimum payments as the interest could be close to, or even higher with some cards, than the minimum payment. It's always good to read your cardholder agreement as the minimum payment is occasionally different.
Also, as mentioned before, paying minimum payments during an introductory APR is dangerous. It can be fine if you earmark money to pay off the entire balance during the last month of the intro APR. If you don't, however, you will be stuck with a large balance at the end of the introductory period at standard CC interest rates which are generally high. Intro APR offers should also be considered carefully as maxing out (or even putting more than 10, 30, or 50 percent of a cards limit in balances) a card can be damaging to one's credit. Even if you are not looking for new credit, you might find AAs on your other accounts that could result in a chain reaction of closed accounts and CLDs. If you have a good overall credit file and if your overall utilization is not crazy high (less than 30%) even with the BT, then going up to 50% on a BT card is probably fine. Don't max out the BT card and don't let your overall utilization across all cards get over 30% or so due to an introductory BT offer. Under 10% on BT card and under 10% overall is ideal, but not always practical when trying to take advantage of a BT. But, if at all possible, try to keep your overall utilization under 30% and your BT card's individual utilization under 50% (lower is better for both).
The Minimum Payment usually is built from any penalties, paid first, then current interest on the various balances, then some percentage of the open balance, often 1% of the balance, then all that compared to the hard dollar minimum, which can be $10 to $35 depending on the card.
@gen-specific wrote:Hello, with 0% APR, what are the card's minimum payments based on? Balance divided by 12? Balance divided by 36? Different for every account agreement? General industry practice I'm not aware of?
How is this calculated
Minimum payment is part of the Terms & Conditions mailed to you with the card. Generally, promos etc still fall under the credit card T&C. 1% to 2% is pretty standard and some will add in any interest for the previous billing period along with fees. Need to check your T&C or contact the card provider.
@ArmyVietVet wrote:
@gen-specific wrote:Hello, with 0% APR, what are the card's minimum payments based on? Balance divided by 12? Balance divided by 36? Different for every account agreement? General industry practice I'm not aware of?
How is this calculated
Minimum payment is part of the Terms & Conditions mailed to you with the card. Generally, promos etc still fall under the credit card T&C. 1% to 2% is pretty standard and some will add in any interest for the previous billing period along with fees. Need to check your T&C or contact the card provider.
+1 Yup !
Note too that my example was just made to explain the process, not quote terms of Discover or anyone else.
i'm clueless here.
mine are always $0 or $25