I continue to clean up my huge archive. Many times I simply delete old silly content, but this topic is still valid. If you carry a large credit card balance, and make only minimum payments, you are in for a shock. Look for how long it will take to pay off the balance (it must be in your statement). This was originally published back in 2010.
My current credit card balance is quite large this month due to a bunch of specific previously planned expenses (and a couple that we hadn’t planned). The bill will be paid on time, so there is not too much worry about starting a cycle of credit card interest charges (at least that is my plan, unless I forget to pay on time).
Having wandered through the wonderland of spending, I tripped across the following sentence:
19 years? Aye Carumba, that is an astounding time frame. So my estimation if we were making this same payment that the effective yearly rate is about 20% and I’d end up paying in total about 500% of the initial amount on the credit line once all payments are made, pretty cool eh?
I realize that sometimes folks spending gets out of control. Sometimes, bad things happen that knock you off your financial feet. If this happens you must fight to get back to paying off the entire balance of your credit card monthly. The interest rates on Credit Cards can be over 20% and will dig a deep financial debt hole for you.
Some ideas you can do to stop paying Credit Card interest:
- Set up an unsecured line of credit. This can be good, if you treat is as an Emergency only credit vehicle. Typically this has a lower interest rate, but it has risks. If you habitually use the LOC to pay off Debt, but can’t pay off that balance, maybe this is not the way to do it.
- Consolidation loans or consolidation into your mortgage sounds good. If you use it once, it can get you back on track. If you use it habitually, that is a very bad thing. You are digging a bigger debt hole, more slowly.
- Borrow it from your family or friends? A last resort, and it can destroy relationships, but it could work, short term.
- Pay Day Loans? Absolutely, positively NO! Go talk to a licensed insolvency professional before you do this.
The amazing things you can read on your credit card statement.