Credit card annual interest rates are notoriously high. While most consumers would prefer to reduce, if not eliminate, credit card debt, it remains a common item in household budgets. Here’s how to calculate credit card interest in Excel so you can estimate how much money you’ll save by reducing or eliminating your credit card debt or switching to a card with a lower interest rate. Saving money on credit card interest is also covered.
Method 1 Gathering Data and Setting up Excel
1. Gather the information for all credit card accounts. Take a look at your most recent statements. Look for the current balance, minimum payment percentage, and annual interest rate for each card near the top or bottom of the page.
2. Open a new workbook in Microsoft Excel. Credit Card Name, Beginning Balance, Interest Rate, Minimum Payment, Interest Amount, and New Balance should be labelled in cell rows A1 through A6.
The New Balance column at the bottom of the spreadsheet should equal the Beginning Balance minus the Minimum Payment plus the Interest Amount.
You’ll also need 12 rows for each credit card to see how paying the minimum amount will extend your debt and accrue a lot of interest over time.
2. Fill in the blanks with the information from your credit card statements. Use a separate column for each credit card. As a result, the first credit card’s information will be entered into column B, rows 1–5. The following credit card will be entered into column C, followed by rows 1–5, and so on.
If you can’t find the minimum payment percentage on your statement, divide the minimum payment amount by the statement’s ending balance to get a percentage. Because the dollar amount changes each month, you must calculate the percentage.
Assume you have a Visa card with a $1,000 starting balance, an annual interest rate of 18%, and a minimum payment of 3% of the total.
In this case, the minimum payment would be $30, or the formula “=1000*.03.”
Method 2 Calculating Credit Card Interest
1.Determine the monthly interest rate. Enter the following formula in each cell in Row 6 where you have an account: “=[Letter]2*[Letter]3/12” in the cell and press the Enter key. If you were going to enter the formula in B6, for example, you would type “=B2*B3/12” and press the Enter key. Copy the formula in cell B6 and paste it into all of the other cells in Row 6 that have account columns. Excel will automatically adjust the formula for any cells into which you copy/paste it.
Depending on how many credit cards you have, you will have previously entered all of the credit card information in columns C, D, E, and so on. The copied formula will automatically calculate the new data from each column.
To calculate the monthly interest charge, divide the annual interest rate by 12. The formula will return a monthly interest charge of $15 for this example of a $1,000 balance at 18% annual interest.
2. Contrast interest payments with principal payments. Once you’ve entered your information and the formulas have been calculated, you’ll be able to see how much interest you’re paying on each card and how much principal you need to pay each month. It’s critical to understand how much of your payment is allocated to interest and how much is used to reduce your principal. You want your monthly payments to reduce your principal as much as possible, which a lower interest rate allows you to do.
Transfer your balances to cards with a lower interest rate or a zero percent introductory rate to pay off your credit cards as quickly as possible. For more information on how to do this, see the rest of this article.
3. Add up all of your monthly interest charges. Use the “SUM” function to create a formula. The syntax is “=SUM(B6:E6),” where E6 represents the last number-containing cell in row 6. This is the total amount of interest you pay each month on all of your credit cards.
Remember that the interest rate will fluctuate each month as you make payments on the balance.
Method 3 Saving Money on Credit Card Interest
1. Find credit cards with lower interest rates and no annual fees. Search the terms “low interest rate credit cards,” “zero percent introductory rate credit cards,” or “no annual fee credit cards” on the Internet. Once approved, it is simple to transfer your balance from your current high-interest credit cards.
You will get a lower interest rate if you keep your credit score high (over 690) by paying all of your bills on time.
If you have been a loyal customer, check the interest rates on credit cards with your bank or credit union.
2. Pay more than the bare minimum. Most credit card statements include a section that shows how much you will pay in total if you only make the minimum payments each month versus paying more than the minimum each month. If you can add at least $10 to the minimum amount owed each month, you will be able to pay off your cards faster and improve your credit score. Once you’ve paid off one card, apply that payment amount to another card’s payment to quickly pay off another high-interest card.
To protect your credit score, make minimum payments on all credit cards, but make extra payments on the cards with the highest interest rates.
3. Take advantage of zero-percentage-point deals. If you have a credit score of at least 690, you will most likely receive offers in the mail for credit cards with no interest for a year or more. Transfer your high-interest cards to a zero-interest card once you’ve been approved. Try to pay them off before the zero-interest period expires.
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