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Saving Cash After The Holidays Begins With Sending More Than The Required Amount On Your Credit Cards
Since it may feel like you’re saving funds by sending the minimum amount due on your credit card, the truth is, you’re really spending much more. This time of the year more than ever, the feeling to only pay the required amount and convincing yourself you’ll have more funds to spend on gifts and yuletide greetings is a problem for a lot. No matter the balance of debt you currently have, this data will show you the importance of paying more than the minimum – something that could save hundreds of dollars over time. How’s that for a stocking stuffer?
I’ve been asked lots of times if it is cheaper to have a debt consolidation loan or many credit cards, some with zero interest. The first thing you need to evaluate is how fast you want to pay the debt off. The best piece of knowledge is that you pay it off as fast as possible. Let’s have a look at the effects of making the minimum monthly payment on a credit card.
With more and more credit card companies are being nice and allowing even lower minimum payments you may think this is a good thing. And you may be right if you are really down, but beware, it is costing you a lot in the long run, which of course is why they do it. Yes, I know it is a shock, you assumed they were just being friendly! Unlike a debt consolidation loan that has set monthly charges (Assuming rates don’t update), you can vary the monthly charge on a credit card. For example, if you have a credit card debt of 3,000 with an interest rate of’ percent (Annual Percentage Rate) and the required payment allowed is 3%. In this case the required 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!
Now, the next month you receive a letter with your statement showing that you are such a great 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 look at what you are really paying. By making the new required charge 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 extra 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 kind after all, maybe a debt consolidation loan with it’s higher monthly payments isn’t such a terrible suggestion.
Yeah, I can hear you wondering, 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.
So I would advise you to pay more than the minimum payment and pay of the credit card debt as soon as you can. 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 consider.
Does holiday shopping have your credit cards maxed out, debt cures from Debt1Options is a great way to reduce credit card debt today.
categories: credit card debt,debt settlement,unsecured debt,personal finance,debt,credit,bankruptcy
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