Release Date: April 16, 2009
For immediate release
Carrying a credit card balance is costly--particularly for consumers who make only the minimum monthly payment. The Federal Reserve Board's online Credit Card Repayment Calculator will allow consumers to estimate how long it will take to pay their credit card bills under different payment scenarios.
"By identifying the true cost of credit, this new tool can help consumers devise a plan to manage the cost of carrying a credit card balance," said Federal Reserve Board Governor Elizabeth A. Duke. The median balance on credit cards, as reported in the Federal Reserve Board's 2007 Survey of Consumer Finances, is $3,000. The average interest rate on cards that carry a balance is 13 percent. Using the calculator, consumers will find that paying off a $3,000 balance at an interest rate of 13 percent could take as long as 16 years and cost $2,812 in interest if they only make the minimum payment each month.
The calculator can be accessed at http://www.federalreserve.gov/creditcardcalculator/ and is one of several resources the Board provides to help consumers make informed decisions when shopping for credit cards. A Spanish-language version is available at www.federalreserve.gov/creditcardcalculator_espanol/. Consumers can use the calculator to estimate how long it will take to pay off their credit card bills if they only make minimum payments. They can also estimate the monthly payments needed to pay off a balance in a specific number of years or the amount of time it will take to pay off their balance if they pay a specific amount each month.
"We hope that, armed with this information, consumers can make better decisions for themselves and their families," Governor Duke said.
Consumers can also access the calculator via a toll-free number: (888) 445-4801. At the voice prompts, consumers can key in their balance and the account's annual percentage rate (APR) to obtain a payoff estimate. Information is available in both English and Spanish. The alternative payoff options are available over the phone as well. Information is also available via TTY at (888) 319-4802.
Creditors that are depository institutions having assets of $250 million or less may use these toll-free numbers to comply with the Federal Reserve Board's recent amendments to Regulation Z, which will require creditors to disclose on the periodic statement a toll-free telephone number that consumers may call to obtain an estimate of the time it would take to repay their account balance. This disclosure becomes mandatory on July 1, 2010. These creditors may also disclose, at their option, the Federal Reserve Board website addresses noted above. For additional information, see the Federal Reserve Board's Final Rule Amending Regulation Z: HTML | 499 KB PDF.