The Debt Dilemma in South Africa

In South Africa, increasingly burdensome debt loads brought on by personal credit cards have soared in the last decade.  South Africa’s government has recognized the dangerous this impact this is having and has begun to reach out to consumers and educate them on the proper use of revolving credit.  A very popular education tool is the credit card calculator

Credit cards have made it convenient to purchase anything at any time. Too convenient, some would say, as people are constantly getting into debt problems arising from accumulated purchases that went out of hand. Those who want to solve their financial woes must learn to exercise prudent spending and pay their credit card balances in a sensible manner. Several methods are available and owners may use an online credit card calculator to help them craft a logical plan that works for them.

A number of websites offer these calculators such as the Federal Reserve, CNN Money, Bankrate and others. They operate in much the same way with only a few variations.  Unfortunately some are limited to specific countries, however if you use a US VPN or perhaps a British proxywhich can give you a UK IP address then you should be able to access most of these irrespective of your location.  Each will ask for the following inputs:

1. Total Balance – Outstanding balance of a credit card as reflected on the latest bill. It is the sum of all purchases made using the card.

2. Interest Rate – Sometimes referred to as APR or Annual Percentage Rate. The interest rate often varies per transaction but not all of them can be considered as this would make the calculations quite cumbersome. For simplicity, the highest one should be used to make the most conservative calculation. In the United States, credit card interest rates generally range from 7% to 36%.

3. Minimum Monthly Payment – The lowest amount that will be accepted by the card issuer. Banks differ in their minimum monthly payment calculations so verify this value just to be certain. Some online credit card calculators assume a baseline amount for simplicity. Using this value, calculators can provide the number of years it will take to pay the debt in full, assuming that the owner sticks to the minimum amount the whole time and no further purchases are made using the card. Calculators will also show the total interest paid in dollars which tends to be significant.

4. Fixed Payments – The amount a credit card user is willing to pay per month to cover the debts. This is ideal if the card owner can afford to pay higher than the set minimum monthly payment. Those who choose this payment scheme will finish completing their obligations sooner and are charged a lower overall interest. The bigger the amount, the faster the completion will be as shown by the calculators’ results.

5. Debt-free Deadline – Used if the over-riding consideration is the time it would take to clear all the debts. Card owners can specify the number of years in which they plan to have everything paid off and the calculators will present them with the monthly payment value required to accomplish this plan.

There’s no denying that a credit card calculator is very useful in studying financial scenarios and creating a debt payment plan that suits one’s specific circumstances.