Don’t Pay Only the Monthly Minimum on Your Credit Card

Don’t Pay Only the Monthly Minimum on Your Credit Card-Part One

You may think that when you pay on time the minimum amount due on your credit card at the end of each month, you’re being financially responsible.  Think again. 

True, paying the minimum on time will keep you from being hit with late fees or suffering a blow to your credit rating.  But that’s not the whole story. 

The long repayment period

Consider the following: If your credit card’s outstanding balance is $926.53 and the interest rate is 19.9% -- a widespread rate these days – then paying only the minimum required each month means it will be eight years and two months before you’ve paid off the full amount.

If your credit card’s outstanding balance is $4,797.36 and the interest rate is still 19.9%, then paying only the minimum required each month will mean it will be 42 years and one month before you’ve paid off the full amount.

It’s not just that you’ll be repaying what you borrowed on the credit for as far as you can see into the future: it’s that you’ll be paying a huge and unnecessary amount of interest in addition to repaying the original sum.

In part 2 of this series we’ll cover unnecessary interest expense and how your minimum payment is applied.

Till then for more valuable financial advice, please visit us at prudentfinancialservices.net