Most people really do not understand the true cost of credit, particularly the true cost of credit cards given an interest rate of 12% to 22%.
Below the “minimum monthly payment” listed on a credit card bill is structured to keep the monthly payment “affordable.” However, that low month payment is not without a price- a huge price. So, if you use credit cards, and if you cannot pay off the card in full each month, make it a priority to ALWAYS pay more than the minimum due.
To further illustrate the importance of paying more than the minimum due, you may wish to use some of the following calculations:
According to an amortization* table, given a $2,000 fixed (no additional charges) credit card balance with 17% interest rate, if a consumer pays:
Below the “minimum monthly payment” listed on a credit card bill is structured to keep the monthly payment “affordable.” However, that low month payment is not without a price- a huge price. So, if you use credit cards, and if you cannot pay off the card in full each month, make it a priority to ALWAYS pay more than the minimum due.
To further illustrate the importance of paying more than the minimum due, you may wish to use some of the following calculations:
According to an amortization* table, given a $2,000 fixed (no additional charges) credit card balance with 17% interest rate, if a consumer pays:
- $28.37 per month; it will take 40 years to pay off the loan
- $28.52 per month; it will take 30 years to pay off the loan
- $29.34 per month; it will take 20 years to pay off the loan
- $34.76 per month; it will take 10 years to pay off the loan
- $49.71 per month; it will take 5 years to pay off the loan
- $71.31 per month; it will take 3 years to pay off the loan
- $182.41 per month; it will take 1 years to pay off the loan
*Amortization is the term used to describe the process of paying off a loan over a predetermined period of time at a specific interest rate. The amortization of a loan includes, during each payment cycle, a payment of interest and of a portion of the outstanding principal balance.
