While it may feel like you're saving cash by sending the minimum amount due on your credit card, the reality is, you're really paying much more. This season of the year more than others, the feeling to only pay the required amount and convincing yourself you'll have more funds to spend on presents and yuletide greetings is a problem for many. No matter the balance of debt you currently have, this article will show you the importance of paying more than the required - something that could save thousands of dollars over time. How's that for a stocking stuffer?
Over time I have been probed lots of times if it is cheaper to have a debt consolidation loan or many credit cards, some with no interest. The first thing you need to decide is how quickly you want to pay the debt off. The best piece of advice is that you pay it off as efficient as possible. Let's have a look at the effects of making the minimum monthly payment on a credit card.
Currently more and more credit card companies are being open and allowing even lower minimum charges you may say this is a good thing. And you may be right if you are really down, but beware, it is costing you a fortune over time, which of course is why they do it. Yes, I know it is a shock, you thought they were just being friendly! Unlike a debt consolidation loan that has fixed monthly payments (Assuming rates don't change), you can vary the monthly charge on a credit card. For example, if you have a credit card balance of 3,000 with an interest rate of' percent (Annual Percentage Rate) and the minimum charge allowed is 3%. In this case the minimum monthly charge is 90. By making this charge and not using the card for anything else, it will take 12 years and 5 months to pay off this debt, and you will have paid a total of 2,714.16 in interest!
So, the next month you receive a letter with your statement showing that you are such a good customer they are going to reduce the minimum charge to 2%. Great, you think, I've only got to pay 60 month and I can spend another 30 down the pub. But lets see at what you are really paying. By making the new minimum payment only, it will now take you 28 years and 5 months to pay off your card and you will be spending a whopping total of 7,845.73 in interest. This is an additional 16 years and 5,131.57 in extra interest, rather an expensive trip to the pub I would say. So, maybe the credit card company isn't being so nice after all, maybe a debt consolidation loan with it's higher monthly payments isn't such a terrible idea.
I can hear you asking, but what about the credit card with no interest, well, that is different topic, but basically some people forget to change at the end of the period and end up with high interest.
With this in mind I would recommend you to pay more than the required payment and pay of the credit card debt as soon as possible. If you're not able to pay even the required, a debt consolidation loan with a reduced interest rate and a shorter period or debt settlement may be choices to look at. - 31380
Over time I have been probed lots of times if it is cheaper to have a debt consolidation loan or many credit cards, some with no interest. The first thing you need to decide is how quickly you want to pay the debt off. The best piece of advice is that you pay it off as efficient as possible. Let's have a look at the effects of making the minimum monthly payment on a credit card.
Currently more and more credit card companies are being open and allowing even lower minimum charges you may say this is a good thing. And you may be right if you are really down, but beware, it is costing you a fortune over time, which of course is why they do it. Yes, I know it is a shock, you thought they were just being friendly! Unlike a debt consolidation loan that has fixed monthly payments (Assuming rates don't change), you can vary the monthly charge on a credit card. For example, if you have a credit card balance of 3,000 with an interest rate of' percent (Annual Percentage Rate) and the minimum charge allowed is 3%. In this case the minimum monthly charge is 90. By making this charge and not using the card for anything else, it will take 12 years and 5 months to pay off this debt, and you will have paid a total of 2,714.16 in interest!
So, the next month you receive a letter with your statement showing that you are such a good customer they are going to reduce the minimum charge to 2%. Great, you think, I've only got to pay 60 month and I can spend another 30 down the pub. But lets see at what you are really paying. By making the new minimum payment only, it will now take you 28 years and 5 months to pay off your card and you will be spending a whopping total of 7,845.73 in interest. This is an additional 16 years and 5,131.57 in extra interest, rather an expensive trip to the pub I would say. So, maybe the credit card company isn't being so nice after all, maybe a debt consolidation loan with it's higher monthly payments isn't such a terrible idea.
I can hear you asking, but what about the credit card with no interest, well, that is different topic, but basically some people forget to change at the end of the period and end up with high interest.
With this in mind I would recommend you to pay more than the required payment and pay of the credit card debt as soon as possible. If you're not able to pay even the required, a debt consolidation loan with a reduced interest rate and a shorter period or debt settlement may be choices to look at. - 31380
About the Author:
Will holiday shopping have your credit tapped out, debt options from Debt1Options is a great way to settle credit card debt today.
