Question: Should I Only Pay the Minimum Payment on My Credit Cards?
The minimum payment on your credit card is determined by taking a percentage of your balance of your balance and charging you that percentage each month. This amount is a very small percentage of your balance, usually about three percent, and it would take you years to pay off your credit card if you followed this outline.
When you look at your credit card statement, look at the amount you are charged in interest each month, some credit cards only have you make a payment that barely covers the interest, and it will take you forever to get out of debt. For example if you have a credit card with a $6000.00 balance, and make a three percent payment each month, this a $150.00 payment. $50.00 of this covers the interest, and it will take you 210 months or seventeen years to get out of debt. Over time the amount of your interest will be over $2000.00.
It can be discouraging to realize that you have years of credit card payments ahead of you, but if you stop using your credit cards, and really focus on getting out of debt, you can change the situation. It may take serious lifestyle changes and a moratorium on spending for a short period of time, but it will be worth the hard work and sacrifice to get out of credit card debt.
Continuing to use your credit cards will only worsen the situation. It is not okay to assume that because you can meet the minimum payment requirements on your cards that you are okay financially. Credit card debt drastically reduces your spending power. If you have too much, it can limit your choices when you decide to buy a home or a car. Many credit card purchases are on goods or services that have no lasting value. It is a poor choice every time you choose to spend on a credit card.
When you decide to get out of debt you will need to begin making more than the minimum payment. You need to increase your payment as much as you can, but it is smarter to increase only one payment at a time. This increases the power of your payment, and will allow you to get out of debt much more quickly. Once you have paid off one card, then move all that you are paying on it to the next card. Transferring your balance to a lower interest card can help you pay down the debt more quickly. You'll be surprised at how quickly you can get out of debt. Once you have paid them off you should close your credit cards.