Credit Finance

Monday, March 22, 2010

Credit Card Debt - Monthly Payments and Finance Charges

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Some Australian cards require cardholders to pay off credit card debt in its entirety each month. As benefits, they normally do not charge finance fees and at times, no maximum limit. Most cards being offered today are known as revolving credit. This means cardholders are allowed t carry a balance.

Any outstanding card debt will earn interest that cardholders must pay. In addition, you are given a minimum amount to pay credit card debt. Often, the minimum amount of payment is 5% of your current balance.

Knowing how finance charges are being calculated by card companies is important. This gives you a better idea how your credit is being computed. The following are the three methods used by card companies to determine an individual's finance charges:

Adjusted Balance

This method is widely believed to favour the cardholders. This method takes the balance from your previous statements, adds new fees, subtract the payment you made and then it is multiplied by the monthly interest rate.

Average Daily Balance

This is the most commonly used system by many card companies. First, your card company tracks your balance each day. They add charges and subtract payments as they occur. At the end of the period, they will calculate the average totals of these and then multiple the number by the monthly interest rate to determine finance charges.

Previous Balance

Note that this method is believed to favour the card company and not the cardholder. The card company will multiply your previous statement's balance by the monthly interest rate. This means that cardholders will still be charged interest on their balance a whole period after they pay off credit card debt.

The bottom line is, the amount that a person will pay will depend on the balance, the interest rate that applies and the way additional fees are calculated by his/her respective card companies.

Finding the perfect credit card that suits your needs and exceed your expectations shouldn't be hard. Find out how to get the best credit cards from top rated credit card companies only at http://www.thecreditcardguide.com.au/

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Labels: credit card debt, credit finance, payments finance