An alternative way To Eliminate Your Credit Card Debt
Tuesday, May 25th, 2010
We know of hundreds of Americans in existence who have repaid serious credit card debt, To get rid of consumer credit card debt, it won’t be enough, however, to just make minimum monthly payments. In fact, you just have to do a little more than just paying out the minimum once a month payments; you save thousand in interests and cut short a number of years in reducing your credit card debt. To present you with a much better picture the way it works, let use an example to expand the solution.
Case Study :
A good friend of mine asked me to have a look at her monthly credit card records; according to her, she has discontinued using the credit card and attempt to repay it completely, but feels like she isn’t getting anywhere.
The credit card statement records shows her balance is $5218.00 and she is paying 18% of interest; and she is paying the minimum payment at 3.5% . Like some who are confused with financial matters, she believe that if she stops using the card and continue paying the bare minimum monthly balance, her credit card debt will be eliminated soon.
The Calculation Result
If she has stopped using this credit card, and makes the minimum monthly payment required, as as she has done so far, based on the way her bank calculates her minimum required monthly payment.
It should take her 181 months to pay up her present credit card balance of $5,218.00 and she will pay a total of $3762.35 in interest.
This means that, if she proceeds doing what she has been doing. It will take her fifteen years and cost her $8980.35 to pay off her $5218.00 credit card balance. No wonder she believes like she is not paying her debtSo, what should she do about it ?
In fact, it’s quite simple, if she is capable of paying the bare minimum payment of $5,218.00, which is $181.37, which means this is her affordable amount. Instead of paying the minimum payment as defined by the credit card company, she continues to pay $181.37 from now on.
As the result, she will pay back this credit card in 43 months instead of 181 months and she will pay $1635.45 in interest instead of $3762.35 in interest, saving $2126.90 in interest charges. See the diverse?
If she really wants to go for it, she could increase the amount of her newly self-imposed minimum required for monthly payment. For example, if she increases her payment by $18.63 a month for a total of $200.00 a month.
she will finish paying this credit card in 34 months rather of 181 months and she’ll pay $1428.30 in interest instead of $3762.35 in interest, cutting down $2334.05 in loan repayments.
If she were to start paying an additional $68.63 a month for a total of $250.00 a month, she will pay off this credit card in 26 months instead of 181 months and she will pay $1071.09 in interest instead of $3762.35 in interest, saving $2691.26 in interest charges.
If she really wants to eliminate her credit card debt as soon as available and her financial is able to support it, she could double the amount of her “new” self-imposed minimum required monthly payment. If she were to start paying $362.74 a month instead of $181.37 a month, she could pay off her credit card balance in 17 months.
To sum up
There are a number of things she could do, but this is among the simplest and it is something anyone can start doing right now to begin eradicating her credit card debt.
If all you do is stop using your credit card and continue making the same minimum required monthly payment you will be making on your credit card this month, every month from now on, you will make significant progress towards completely eliminating your credit card debt once and for all.