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What is a "principal repayment" on credit card debt?*

I don't understand this example of credit card debt repayment... Let's say John and Jane both have $2,000 debt on their credit cards, which require a minimum payment of 3%, or $10, whichever is higher. Each month John and Jane are charged a 20% annual interest on their cards' outstanding balances. Here is the breakdown of the numbers for the first month of John's credit card debt: Principal: $2,000 Interest: $33.33 ($2,000 x (1+20%/12)) Payment: $60 (3% of remaining balance) Principal Repayment: $26.67 Remaining Balance: $1,973.33 ($2,000 - $26.67) (found at http://www.investopedia.com/articles/01/061301.asp) What is the principal repayment for? Isn't the payment of $60 each month to the bank paying the debt back? Why are there two charges for paying back the principal of $2000, the Payment and Principal Repayment? I don't get it. Help please! Thank you all for your answers!

Answers:

1) Of the $60 payment, it means $26.67 went on the principal and $33.33 went to the interest. That's all. Just a breakdown of how your $60 payment was sliced up.

2) The person paid $60 total. The first $33.33 just paid the interest that accumulated that month. The remaining $26.67 pays back the money that's owed, so the balance goes down by $26.67 The current balance is called the principle. So the portion of the payment that reduces the principle is called the principle payment. Payment is the total amount paid that month Interest payment is the portion of the payment that pays the interest Principle payment is the portion of the payment that reduces the principle (balance) The principle payment plus the interest payment make up the total payment.

3) if a bank or credit card loans you money, they charge you for it in the form of interest. the amount you borrowed is the principal and the interest accumulates every month the balance isn't paid off. that's why not paying off a loan right away can make you owe more in interest than you borrowed in the first place.

4) The portion of the payment that goes toward the actual debt is the principal repayment. The rest is interest and other charges (as many as the lending company could shove off on the borrower). You make a $60.00 dollar payment and your lucky if $26.67 of it goes to your balance. This method is how credit issuers make their money and the price you pay for using their money instead of your own.

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