If you think you’re managing your money by paying just the minimum monthly amount, think again. By doing that, you’re paying far more than the cost of your purchase. Minimum payments are designed to make you pay a fortune over time.
Minimum payments can really cost you.
Your payment is divided between the interest and the balance (also called the principal.) The majority of the payment goes towards interest, while the remainder is put towards the balance. For example if you have a credit card with a $6,000.00 balance, and make a three percent payment each month, this a $150.00 payment.
$50.00 of this covers the interest, and it will take you 210 months or seventeen years to get out of debt. Over time the amount of your interest will be over $2,000.00. Your statement should have a box that shows you how long it will take you to pay off the card if you make the minimum payment, as well as the amount you need to pay each month to pay off the credit card in three years.
So how can you get out of this trap?
The best thing you can do to avoid being enslaved by your credit cards is pay more than the minimum amount. If you’re worried that your budget can’t possibly handle paying any more, it’s important to remember that every little bit helps. Even if it’s just an extra $5 a month.
If you have credit card debt and are worried that you can’t pay it off, contact us today for a free consultation. There are many debt settlement options that we can review with you.
