Don't know which credit card is right for you? Not sure of the best approach to paying off your debt? Online financial calculators can answer these questions and many more. And they're fast and easy to use -- a big plus if you aren't great with numbers.
What Can Financial Calculators Tell You?
There are calculators for finding the answers to everything from "How much life insurance do I need?" to "How big of a mortgage can I afford?" With respect to credit cards, here are the fundamental questions a financial calculator can answer:
- What impact do different interest rates have on my unpaid card balance?
- What will it take (in monthly payments) to pay off my debt in a specific amount of time?
- How long will it take to pay off my debt making a specific monthly payment?
- Which is better, a higher-cost card that offers airline miles for dollars spent, or a lower-cost card that doesn't offer mileage?
- Am I better off choosing a card with a lower interest rate or one with no annual fee?
- Should I consolidate my debts?
To use the calculators, you'll need to come prepared with some key bits of information. For example, to find out what it will take for you to pay off your debt, you'll need to know how much you owe, what you plan to pay each month, what your interest rate is, whether you have an annual fee and how much it is, and in how many months you would like to be debt-free.
The calculation will then reveal how much you need to pay each month in order to get out of debt in the desired time frame. That number will change if the interest rate or your target date changes. That's the great thing about online financial calculators -- they give you the opportunity to change a figure here and there to compare scenarios.
Online financial calculators are great tools, but financial decisions aren't always black and white. While the numbers may clearly tell you to go one way, other considerations may suggest you go another. Be sure to think about all the factors that are important to you before making a choice. And if you do decide to implement a strategy to reduce your debt, be sure to also develop a plan for increasing your savings. Now that's a calculation that's fun to run!
You can find calculators at most financial Web sites. Just by entering the key words "financial calculators" in your favorite search engine, you can probably find what you need. Here are two to get started with: Yahoo Finance and Bankrate.com
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