Minimum payment, maximum amortization

We all know that we need to pay off our credit cards as soon as possible. However, for some weird reasons, people keep using them and pay the minimum payment. They think that they will pay their debts eventually by doing the minimum payment on their credit card bill.

If you think you will pay off your credit cards by doing minimum payments every month, please do the following step:

#1 Go on Google.

#2 Search for the keywords “amortization calculator”.

#3 Take any of them and enter your data (owing balance, interest charge and minimum payment).

#4 Through the calculator, request the amortization required to pay off your credit card balance.

#5 Cry.

You will not only take forever to pay your credit card completely but you will pay an enormous amount in interest charges. In addition to that, you will probably use your credit card for other purposes while you are paying it back. Therefore, you will create a recurring payment until your death and give your money away to a financial institution in interest charges.

If you want an idea of what it looks like, here a short example for you. Let say that you owe $2,500 on a 14.5% interest rate credit card; your minimum payment should be around $50. You will need about 77 months to pay it off. That is more than 6 years to pay a $2,500 debt!

If you look closer, you will notice that you will be required to pay $3850 to pay off a debt of $2,500. That is 54% more than your original debt!

If you can’t pay your credit card bill completely at the end of each month, we suggest that you increase your payment as high as possible. If you can, it would be even better if you could fit a regular payment on your credit cards in your budget. Therefore, if you freeze $200 a month to pay down your credit cards, you will pay your debt much faster and avoid interest to be charged for nothing.

If you liked this article, you might want to sign up for my FULL RSS FEED. Then, you would get my daily post in your email and can read it at any time. To subscribe, please click HERE..