CREDIT CARD PAYMENTS CALCULATOR
There are a number of ways to pay-off credit cards:
- Monitor the card balance and pay-off purchases as they go to ensure the card is not overdrawn, or deposit some money before making the purchase.
Budgets Get Real’s Cash Commitments module helps you to monitor payments. It provides a calculation to suggest transfers on a weekly basis, to keep your accounts in balance - subject to the limitations detailed below.
- Pay the card monthly (either in full or to some determined amount) on receipt of the credit card statement. The minimum payment by the nominated date is necessary to avoid incurring penalty fees.
In addition Budgets Get Real provides the following calculator to suggest the best amount to pay-off on a monthly basis. This calculator overcomes a major issue with managing credit cards i.e. one spends the money and waits to see the “damage” on the statement.
- Some combination of the above
The statement value can represent payments up to 30 days in the past. In paying a statement you also may want to be certain that enough is paid off, to be sure that your credit limit will not be exceeded over the next month.
How the Calculator is accessed.
For each credit card account, Cash Commitments analyzes the budgeted and categorised transactions, along with the nominated “Statement calculated on day”, “Days to pay statement”, safe balance and that card’s limit. It then presents one or more of the following links.
Clicking on these links will open the Credit Card payments calculator.
“Credit Card Payment Due” links.
You have already entered the details of the statement received for that month, and have nominated an amount to pay and the date that payment is to be made. These details show in both the To Do List and Account Details.
The amount shown is the amount decided to pay, not the estimate originally suggested. All you need to do is ensure that it is paid by this date. As far as the program is concerned, it is paid on this date.
“Credit Card Payment (estimated)” links.
You have not yet received or entered credit card statement details for this month.
The estimate is the total budgeted or known expenses, relating to the statement period - categorised expenses are used rather than budgeted ones, where available. The estimate may be low due to the extent of the non-budgeted expenses.
The estimate is included as if this month’s bill will be paid-off in total until such time as the statement details are entered and an amount to pay is nominated. Calculations with a nominated “statement calculated day” after today cannot be accessed (no link is provided) i.e. they are simply forward estimates. This prevents the incorrect entry of irrelevant data.
How to use the calculator
The calculator provides the following details:
Enter the date the statement is calculated to, the total balance, the minimum you must pay and when you must pay by.
Once this is done the calculator will suggest a minimum amount to pay. Review this suggestion and enter how much you intend to pay and when.
Once you have completed these steps and selected Update, the commitments summary will adjust all balances to suit. Carefully examine the balances, and if necessary re-open the calculator and adjust the value to pay. You may also wish to try changing the Use Weekly Transfers option - in Accounts Detail, watching its effect on the Top Balance column.
How to decide the amount to pay
In deciding how much to pay off each monthly statement there are a number of criteria:
1. You should never pay less than the mimimum amount nominated on the statement. To pay less will result in penalty fees. Enter this amount into field
2. You must always pay the minimum balance by the Due date. Enter this date (shown on the statement) into field
3. If you can’t pay the account in full you must at least pay sufficient so that you will not exceed the card limit or your target limits BEFORE the next statement arrives.
The suggested minimum is the sum of your budgeted purchases for the next period. You could pay this in one lump sum by the due date or in parts weekly, as suggested by the program. Paying in full is the most desirable - if you have the money.
The suggested minimum payment can only be determined from your budgeted payments. Impulse purchases on your card will invalidate this calculation - unless you decide to pay the suggested minimum + what you estimate you may spend discretionally in the next month.
MANAGEMENT OF CREDIT CARDS
The issue is how to manage your credit card between periodic import of transactions, categorisation & setting of balance. How you manage this will determine how much you can rely on these calculations. While this is discussed for credit cards, the same principles apply to all account types.
Budgets Get Real calculates commitments & balances on budgeted entries from the Last Balance date. Where this is unknown an adequate safety margin should be kept between the safe balance and the credit limit on the card.
The true credit card account balance will differ from the calculated balance shown by Budgets Get Real due to the following reasons:
1. Expenses prior to the balance date that may not have been recorded at the time the balance was entered. A typical example is cab-charges that may take as long as two weeks to be presented after the expense was incurred.
The simple way to get around this, if you know that a significant item is yet to present, is to add a One-off budget payment against the credit card for the day after the statement was calculated.
2. Non-budgeted expenses since the balance date. There are three simple ways to fix this:
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- Import your latest transactions & work from the last known true balance. Budgets Get Real will suggest that you do not allow this to be more than 14 days old.
- If you don’t import transactions, consider adjusting balances and balance dates to their latest values. This reduces any margin for error to the budgeted transactions since these dates.
- Enter a one-off record of the payment.
Simply select the Add one bill option and enter the amount paid, date, etc… You may wish to simply group several payments together (this is only a budgeting tool - the real details are your actual expenditure). If so, you may create a category like “One-off payment costs” & a name “One-off payments”.
