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On a home loan amortization schedule, I can make the monthly payment and add the principal-only owing for the "next" payment along with it, and avoid paying the interest for that next month, which amounts to skipping over that line on the payment schedule.
Is there a way to do the same for a credit card, with the idea of paying the balance off quicker while simultaneously avoiding the full interest charges? It is a normal VISA credit card.
Credit cards don’t have fixed monthly payments like a mortgage or other traditional loan. As a result, there isn’t really a distinction between “principal-only” payments vs. future pre-payment as there is with a mortgage.
When your credit card statement is generated, the bank adds any finance charges for the month to your balance. This finance charge is instantly capitalized into your debt and is now itself accruing interest. Then the bank calculates two different amounts:
The total statement balance is what you currently owe in total. If you pay this, you will have paid everything off up to the day that the statement was generated. (And, really, you should not be making any new purchases on this card while it is accruing interest.)
The minimum payment amount is what they require from you for the month in order for the account to be considered current. This amount will usually be high enough to cover your finance charges for the month, plus a little extra.
Unlike with a mortgage, you don’t know what this minimum payment will be until they generate a statement. Therefore, you can’t really pay your next month’s minimum payment until they have generated a new statement. (You wouldn’t want to, anyway.) And also, unlike a mortgage, the interest charge is automatically added to your debt, mixing with the principal.
When you send in your payment for the month, the entire payment is applied to your outstanding balance, reducing your debt immediately and causing next month’s finance charge to be that much smaller.
You are free to send in as much as you like with your payment, and you can even make more than one payment in a month. The only watch out here is that, even if you pay extra in a month, you still need to make the minimum payment the following month after the new statement is generated.
Credit card debt is awful, and the interest rates are generally ridiculously high. I would encourage you to send in as much as you possibly can and get this debt eliminated as quickly as possible.
Outside of any payment plan that might be set up, credit cards don't amortize - they charge interest on the unpaid balance at the end of the month, without regard for previous months, and then add that to the balance.
Any amount you pay the credit card company is applied to that balance -- there's no differentiation between principal and interest, because unlike in a mortgage, your payments (and thus interest) are not precomputed ahead of time.
Ideally, you pay your entire balance every month, and thus never pay anything in interest charges at all. Absent that, the more you pay each month, the less you'll pay in interest.
However, it's not a payment schedule: even if you pay ten times the minimum payment this month, that doesn't mean you don't need to pay anything next month -- absent a specific payment agreement with the company, you must make the minimum payment every month. You are still always better off paying earlier than later, though, because the earlier you pay the less interest you'll pay.
