Are you trapped into making only minimum payments on your credit cards? I hope not.
Minimum payments decline as the balance on the credit card declines.
Let’s take a credit card with a $2000 balance at 15% interest to use as an example. You would expect to pay about a $40 (2%) monthly payment when you start making your payments:
By making the minimum payment only, it will take you 13 years and 11 months to pay off your credit card and you would expect to pay $2,126 in interest.
However, if you continued paying that $40 until the credit card was paid off, it would only take you 6 years and 6 months to pay off the credit card and you would pay about $1,100 in
interest.
You could save over $1,000 in interest and pay it off in half the time. This is what simply starting with a set payment and sticking to it could save. If you can afford that $40 payment when you start, odds are it won’t hurt you later.
Now, let’s take that a step further. What if you paid just $10 more, $50 instead of $40?
That same credit card could be paid off in 4 years and 7 months with only $740 in interest.
Here is how it breaks...
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