Credit card debt is often the most expensive kind of debt that we, as consumers, carry. And one of the biggest mistakes we can make is to develop the dangerous and expensive habit of making only minimum payments.
Of course credit cards have their purpose and come in handy; however, with the low minimum monthly payments that issuers offer, cardholders can find themselves in debt for decades if they aren’t careful and continuously carrying a balance is a hard habit to break.
If you’re one of those who don’t think twice about racking up credit card debt, paying only the minimum each month, here’s something to seriously consider…
Let’s assume that you owe $5,000 in credit card debt with a 15% interest rate, which is about average, and a minimum payment of 2% of your overall balance. If you make only the credit card minimum payment each month ($100 in this example), then it would take you 27 and a half years (no, that’s not a typo) to pay off your outstanding debt – and that’s if you don’t put any new purchases on the card in the meantime.
27 and a half YEARS!!!!
So by making just the minimum payment, it would take you almost as long to pay off your $5,000 credit card balance as it would to pay off your entire home mortgage.
Just let that sink in for a few minutes. That is CRAZY!
The bottom line is this:
Paying the minimum on your credit cards is NEVER, EVER a good idea. It’s expensive and it can harm your credit scores. Your best bet is to use credit cards in such a way that you can pay them in full every month, without exception.