Minimum Payment Requirements

Oct 13, 2025 by wbrum.org 76 views

Introduction

Credit cards can be a convenient way to make purchases, but they often come with high interest rates and fees. In this article, we will explore the concept of Annual Percentage Rate (APR) and minimum payments on credit cards, using Jordan's credit card as a case study. We will analyze how the APR and minimum payment requirements affect the balance on his credit card over time.

APR and Compounding

The APR on Jordan's credit card is $10.59\%$ per year, compounded monthly. This means that the interest rate is applied once a month, rather than annually. To calculate the monthly interest rate, we divide the APR by 12:

\text{Monthly interest rate} = \frac{10.59\%}{12} = 0.008783\%

The formula for compound interest is:

A = P(1 + r)^n

where $A$ is the future value of the investment/loan, $P$ is the principal investment amount (the initial deposit or loan amount), $r$ is the monthly interest rate, and $n$ is the number of periods (months).

Minimum Payment Requirements

Jordan is required to make a minimum payment of $3.90\%$ of his current balance every month. This means that if his balance is $\$628.16$ , he must pay at least $\$24.45$ each month.

Calculating the Balance

To calculate the balance on Jordan's credit card over time, we can use the formula for compound interest with the minimum payment applied each month. We will assume that the interest rate and minimum payment remain constant over time.

Let's calculate the balance on Jordan's credit card for each month, starting from the beginning of March:

Month	Balance	Interest	Payment	New Balance
March	$628.16	$5.43	$24.45	$609.08
April	$609.08	$5.32	$23.73	$591.27
May	$591.27	$5.21	$23.01	$573.47
June	$573.47	$5.10	$22.29	$556.28
July	$556.28	$4.99	$21.57	$539.70
August	$539.70	$4.88	$20.85	$523.73
September	$523.73	$4.77	$20.13	$508.57
October	$508.57	$4.66	$19.41	$493.82
November	$493.82	$4.55	$18.69	$479.68
December	$479.68	$4.44	$18.07	$466.05
January	$466.05	$4.33	$17.45	$453.93
February	$453.93	$4.22	$16.83	$442.12

As we can see, the balance on Jordan's credit card decreases over time, but the rate of decrease slows down as the balance gets smaller. This is because the interest rate is applied to the current balance, which is decreasing over time.

Conclusion

In this article, we analyzed the concept of APR and minimum payments on credit cards, using Jordan's credit card as a case study. We calculated the balance on his credit card over time, assuming a constant interest rate and minimum payment. The results show that the balance decreases over time, but the rate of decrease slows down as the balance gets smaller.

Recommendations

Based on our analysis, we recommend that Jordan:

Pay more than the minimum payment each month to reduce the balance faster.
Consider paying off the balance in full each month to avoid interest charges.
Review his credit card agreement to understand the APR and minimum payment requirements.
Consider consolidating his debt to a lower-interest credit card or loan.

By following these recommendations, Jordan can reduce his debt and avoid the high interest rates associated with credit cards.

Frequently Asked Questions

Q: What is the APR on Jordan's credit card?

A: The APR on Jordan's credit card is $10.59\%$ per year, compounded monthly.

Q: What is the minimum payment requirement on Jordan's credit card?

A: The minimum payment requirement on Jordan's credit card is $3.90\%$ of his current balance.

Q: How does the APR affect the balance on Jordan's credit card?

A: The APR affects the balance on Jordan's credit card by adding interest to the current balance each month.

Q: How does the minimum payment requirement affect the balance on Jordan's credit card?

A: The minimum payment requirement affects the balance on Jordan's credit card by reducing the current balance each month.

Q: What can Jordan do to reduce his debt?

Q: What is the APR on Jordan's credit card?

A: The APR on Jordan's credit card is $10.59\%$ per year, compounded monthly. This means that the interest rate is applied once a month, rather than annually.

Q: What is the minimum payment requirement on Jordan's credit card?

A: The minimum payment requirement on Jordan's credit card is $3.90\%$ of his current balance. This means that if his balance is $\$628.16$ , he must pay at least $\$24.45$ each month.

Q: How does the APR affect the balance on Jordan's credit card?

A: The APR affects the balance on Jordan's credit card by adding interest to the current balance each month. The interest rate is applied to the current balance, which is then added to the balance to create a new balance.

Q: How does the minimum payment requirement affect the balance on Jordan's credit card?

A: The minimum payment requirement affects the balance on Jordan's credit card by reducing the current balance each month. The minimum payment is subtracted from the current balance, which then becomes the new balance.

Q: What is the difference between APR and interest rate?

A: The APR (Annual Percentage Rate) and interest rate are related but not the same thing. The APR is the total interest rate charged over a year, while the interest rate is the rate charged per period (in this case, per month).

Q: How can I calculate the APR on my credit card?

A: To calculate the APR on your credit card, you can use the following formula:

APR = (Interest Rate x 12) / 100

For example, if the interest rate is 10.59%, the APR would be:

APR = (10.59 x 12) / 100 = 12.708%

Q: What is the difference between a credit card and a loan?

A: A credit card and a loan are both forms of credit, but they have some key differences. A credit card is a revolving line of credit that allows you to borrow money up to a certain limit and pay it back over time. A loan, on the other hand, is a fixed amount of money borrowed for a specific period of time, with a fixed interest rate and repayment schedule.

Q: How can I avoid paying interest on my credit card?

A: To avoid paying interest on your credit card, you can pay the balance in full each month. This means that you will not be charged interest on the outstanding balance, and you will not be required to make a minimum payment.

Q: What are some tips for managing credit card debt?

A: Here are some tips for managing credit card debt:

Pay more than the minimum payment each month
Pay off the balance in full each month
Review your credit card agreement to understand the APR and minimum payment requirements
Consider consolidating your debt to a lower-interest credit card or loan
Avoid using credit cards for non-essential purchases

Q: What are some common credit card terms that I should know?

A: Here are some common credit card terms that you should know:

APR (Annual Percentage Rate): the total interest rate charged over a year
Interest rate: the rate charged per period (in this case, per month)
Minimum payment: the minimum amount required to be paid each month
Balance: the outstanding amount owed on the credit card
Credit limit: the maximum amount that can be borrowed on the credit card

Q: How can I dispute a credit card charge?

A: If you believe that a credit card charge is incorrect or unauthorized, you can dispute it with the credit card issuer. You will need to provide documentation to support your claim, and the credit card issuer will investigate the charge and make a decision.

Q: What are some credit card benefits that I should know about?

A: Here are some credit card benefits that you should know about:

Rewards programs: many credit cards offer rewards programs that allow you to earn points or cash back on your purchases
Purchase protection: many credit cards offer purchase protection, which can help you get a refund or replacement if an item is lost, stolen, or damaged
Travel insurance: many credit cards offer travel insurance, which can help you get reimbursed for travel-related expenses if you need to cancel or interrupt your trip
Concierge services: many credit cards offer concierge services, which can help you get tickets to events, make restaurant reservations, and more.