All credit card companies are happy and willing to offer you to pay the minimum amount on your credit card balances. The minimum amount payment is the SECRET of all card companies to make money from each credit card customer. That secret is one of the legal methods by which credit card companies can make money out of the unsuspecting and innocent customers.
Let me show you what I am talking about. Let’s talk about the typical number of credit cards and their balances owned and owed by a credit card holder. One typical credit card holder has the following credit cards:
1. Credit Card #1 - Balance - $10,000.00 and an APR (annual percentage rate) of 19%
2. Credit Card #2 - Balance - $7,500.00 and an APR (annual percentage rate) of 17%
3. Credit Card #3 - Balance - $6,800.00 and an APR (annual percentage rate) of 18%
4. Credit Card #4 - Balance - $5,900.00 and an APR (annual percentage rate) of 16%
5. Credit Card #5 - Balance - $4,750.00 and an APR (annual percentage rate) of 18%
After using a reliable credit card payment calculator and entering some parameters like the credit card balance, APR, and the option to pay the monthly minimum payment, the results of the calculations are as follows:
Note: The monthly minimum payment is computed this way: monthly interest plus 1% of the credit card balance
1. Credit Card #1 - Balance - $10,000.00 and an APR of 19%
1.1. The minimum monthly payment is $258.33
1.2. It will take you 344 months (28.67 years) to be rid of your debt. In that time, you will pay $15,239.60 in total interest.
2. Credit Card #2 - Balance - $7,500.00 and an APR of 17%
2.1. The minimum monthly payment is $181.25
2.2. It will take you 311 months (25.92 years) to be rid of your debt. In that time, you will pay $10,065.94 in interest.
3. Credit Card #3 - Balance - $6,800.00 and an APR of 18%
3.1. The minimum monthly payment is $170.00
3.2. It will take you 304 months (25.33 years) to be rid of your debt. In that time, you will pay $9,623.15 in interest.
4. Credit Card #4 - Balance - $5,900.00 and an APR (annual percentage rate) of 16%
4.1. The minimum monthly payment is $137.67
4.2. It will take you 285 months (23.75 years) to be rid of your debt. In that time, you will pay $7,326.07 in interest.
5. Credit Card #5 - Balance - $4,750.00 and an APR (annual percentage rate) of 18%
5.1. The minimum monthly payment is $118.75
5.2. It will take you 268 months (22.33 years) to be rid of your debt. In that time, you will pay $6,548.31 in interest.
With the original balance of $34,950.00, the amount of total payments will become $48,801.98 (an increase of $13,851.98) in more than 22 years.
To minimize the total cost of interest payments of $13,851.98, you can do one or more of the following actions:
1. Immediately call the toll-free telephone number on your credit card statement and talk to a customer service representative to lower the interest rate. Explain your hardships in paying your credit cards. If your request is not granted, call the same telephone number after 2 or 3 days and request for the interest rate reduction. Do this step once a week or twice in one month until you get a favorable reply.
2. Ask the credit card companies if they have a credit card balance transfer promotion, without transaction fees , for you. If yes, transfer the balance with high interest rate to the credit card with lower interest rate.
3. Pay additional amount to your monthly minimum payments starting with the credit card with the highest interest rate irregardless of the balance.
4. Apply for a home equity loan with a bank, if you have an equity on your home, and pay the loan proceeds to all your credit cards. The annual interest rate for a home equity loan is much lower than the interest rate for credit cards (usually 6% to 8% per year ). See to it that you will be able to pay your home equity loan on time.
5. Look for a part-time or second job to augment your income to pay your credit cards.
6. Stop using your credit cards and leave them at home . Scrutinize all your daily expenses and stop spending for unnecessary things. Think of ways on how to save on your utilities; entertainment and dining out; car usage, gasoline, insurance and maintenance; food and groceries; and other things.
7. Seek free credit counseling available in your area by looking at your telephone directory to reinforce your credit card management.
Quote for the Day :
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