Why You Shouldn’t Just Make Minimum Credit Card Payment?
Sometimes the minimum credit card payment associated with your credit card accounts may be all you can seemingly afford. However, simply paying the minimum amount every month can lead you into financial troubles. The only people that benefit from you making the minimum credit card payment each month are your creditors: you end up paying more in financial charges and fees! While making minimum payments is an easy way to stay on top of all your credit card bills and keep your credit score in good standing, hidden behind the ease of minimum payments is mounting debt!
The moment you begin making the minimum credit card payment only, you are only paying on the credit card’s interest and you never tap into the principle of the credit card balance. As you will see on your credit card bill, when you pay a small amount every month, your total bill never really seems to get lower. That’s because each month that you choose to pay the minimum payment, new interest is added on. It’s like being stuck in the mud: no matter how much you spin the tires your car is not going anywhere. On top of adding interest every month, your bill gets higher the more you spend, the more you accept credit card balance increases, and your membership fees, late fees, and penalties are all tacked onto your credit card bill.
Consider this scenario, if you have an existing credit card balance of $5000, the card has an interest rate of 18% and you make a minimum credit card payment of $25 each month, it will take you nearly 13 years to pay off your debt and you will pay $4997 of interest on the initial $5000 you spend! You have practically doubled your debt by making minimum payments! In contrast, if you were to divide up your payments into 60 months and pay $417 every month, you will literally cut your interest payments in half and you will have paid off the card in five years time.
When money is tight, it may be difficult for you to make more than the minimum payment on your credit cards. Making the minimum credit card payment for a couple of months is one thing: it allows you to get back on track and to get the monies together you need to make larger credit card payments. Counting on making minimum payments over the long term however can lead to financial ruin. Consider keeping your practices of making the minimum payment a temporary solution, never a permanent one. If necessary, you might want to give serious thought to get some debt consolidation help. Using loans, credit card balance transfer options, and other means of debt control can help you from preventing the rapid accumulation of credit card debt. Finally, always keep your credit card spending under control: just because you have a high credit limit, doesn’t mean you have to use it.
Reviews
No Comments
Leave a reply