Source
r/personalfinance•
_mynd

How to determine payoff of credit card with two interest rates

Credit

I put a little python script together to help me better visualize paying off some credit card debt. I use it every couple months to make sure I am still on track. It's worked wonders so far and accounts for promotional interest rates. It's not exact but is only off by a few cents from the actual, so I'll keep it :)

Anyway, my question is how to calculate the payoff of a card with two rates (ie: standard rate and promotional balance transfer rate).

Say you have a balance of $1500 at 13.99%. You take the promotion for a $1500 (with fee) balance transfer at 0.00% for 12 months. If this isn't the first card to be paid off, how do you figure the minimum payment?

At the moment, in the script, I am treating it as two separate cards, however, I suspect the minimum payment would actually be less, so I would be able to pay more towards the other cards first.

Posted Jun 15, 2022, 1:00 AM UTC

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1
ahj3939​•

You need to read the terms of the card, minimum payment is usually 1-2% of the balance + interest.

1
BastidChimp​•

Use either the Snowball or the Avalanche method to reduce your debts. There are YouTube videos that have extensive information on these two methods.

1
_myndOP​•

that’s my plan and what I am doing. However, this card with the two percentages won’t be the first to payoff, so how do I calculate the minimum with two rates?

If the minimum on the card is 1%, would it be as simple as ($3000 * 1%) + ($1500 * 13.99% / 12) + ($1500 * 0.00%)? Would this payment go towards just the 13.99% balance? Split evenly between the two rates?

1
Cruian​•

Check the terms of your cards.

Minimum payment is usually something like 1% of balance + any interest.

Payments may be split by the lender, something like minimum goes towards lowest rate, then any additional to highest rate.

1
_myndOP​•

Is that split written out in the terms, by chance?

1
Cruian​•

I believe I have seen it in the "fine print" of at least a few of my cards. Check the "back side" of your statements.

1