Nov
20
The dangers of only making the minimum payment
November 20, 2008 |
If you are only paying the minimum amount each month on your credit cards you may want to reconsider and begin making larger payments toward getting on top of your credit card debt. More and more people these days are making the mistake of just paying the minimum owed on their credit cards which is doing them more harm than good if they actually knew how much time it would actually take them to pay off their debit.
There are huge amounts of people these days that are simply just keeping their creditors happy by making the minimum payment on the balance of their credit card. There was a time where the minimum payment on credit cards was set so low that credit card owners were basically just paying the interest that was due and they were not making a dent in the balance that they owe.
Federal regulators of credit card companies are now suggesting that larger minimum payments be required of those who own credit cards so that the balances owned would be paid off in a more reasonable amount of time. This reasonable amount of time was and still is defined by many as anywhere from seven to ten years. Unfortunately even with higher minimum payments being required it can still take consumers many years to pay off a debt when only the minimum payment is being made.
Getting into the habit of making larger payments then just the smallest amount due you are going to be putting yourself into a position to be paying off your credit card debit at a much more rapid pace. If you successfully stay n the habit of dong this then you are eventually going to have a much better debt to available credit ratio which is going to open the door to even better financial opportunities in the near future.
When you are really taking a look at carrying a debt of $1000 at 14.99%, it is incredibly easy to see why just making the minimum payment is such a bad idea.
If you are paying just the required minimum payment of $10 each month it is going to take you nearly nine years to pay your credit card debt off in full. You will also be charged $576 in interest.
If you choose to instead of making $10 payments each month make $25 payments instead you are going to be able to pay off your debt in about half that time and only be charged $370 in interest.
If you are able to double your payments from $25 to $50 you are going to be able to pay off your debt in around two years and only have to pay around $158 in interest.
Consumers need to be made well aware of the fact that the more time you spend paying off your credit card debt the more of your hard earned money that you are going to lose in paying off interest charges and other fees such as late payment charges. If you are carrying a large amount of credit card debit you are going to very likely find that getting approved for additional credit such as being approved for a home or mortgage loan is going to be incredibly difficult.
To keep your repayment costs down as low as possible it cannot be stressed enough how important having an aggressive repayment plan in place is. While repaying large amounts of credit card debit you also need to refrain from making any unneeded purchases. If you are able to create a reasonable budget for yourself and have the discipline to stick with it you are going to be able to pay off your debt and avoid the needless costs of late fees.
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