Caring for Your Credit: Credit Card Debt
Credit card debt is expensive! Here's A Real World Example of how credit card interest rates and making the minimum monthly payment works.
Suppose when you’re 18, you charge $1,500 worth of clothes and DVDs on a credit card with a 19 percent interest rate.
If you repay only the minimum amount each month, and your minimum is 4 percent of the outstanding balance (the lowest amount permitted by some issuers), you’ll start with a $60 payment. You’ll be more than 26 years old by the time you pay off the debt. That’s 106 payments, and you will have paid more than $889 extra in interest. And that’s if you charge nothing else on the card, and no other fees are imposed (for example, late charges).
If your minimum payment is based on 2.5 percent of the outstanding balance, you’ll start with a $37.50 payment. You’ll be over 35 years old when you pay off the debt. That’s 208 payments, and you will have paid more than $2,138 in interest, even if you charge nothing else on the account and have no other fees.
Wondering how long it will take to pay off your debt? Based on the information you supply, this calculator estimates of how long it will take you to pay off your credit card balance.
*As always, we are not a licensed credit repair company. The information included in this email is meant to be educational in nature. Most information was acquired from https://www.consumer.ftc.gov. However, if you'd like us to recommend a credit repair service just let us know. We have a couple repair companies that are very good and charge a nominal monthly fee.
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