How To Eliminate Your Credit Card Debt
Credit card debt is the key factor that cause most of debtors trapped into debt issue. If you are one of them, it is important that you handle your credit card debt immediately and eliminate it as soon as possible before it reaches to the level that is beyond your financial affordability. To get rid of credit card debt, it won't be enough, however, to just make minimum monthly payments. In fact, you just need to do a little more than just paying the minimum monthly payments; you can save thousand of interests and shorten many years in settling your credit card debt. Consider the case study below:
Case Study:
Mary is holding a credit card debt of $5128.00 and she is trying very hard to pay off the credit card but feels like she isn't getting anywhere. Her credit card interest rate is 18% per annual, and she is paying the minimum payment at 3.5% or $10 whichever is higher. Like many who confuse with financial matters, she thinks that as long as she stops using the card and by just paying the minimum of monthly balance, her credit card debt will be cleared soon.
The Calculation Result:
This calculation is done based on assumption that she had stopped added new debt into her credit card balance while she is paying off her debt. If she continues to make the minimum required monthly payment, as she has been, based on the way her bank calculates her minimum required monthly payment.
It will take her 181 months to pay off her current credit card balance of $5,218.00 and she will pay a total of $3762.35 in interest. In other words, if she continues doing what she has been doing. It will take her 15 years and cost her $8980.35 to pay off her $5218.00 credit card balance. That’s why she feels that her debt is not getting any reduction although she is paying it.
So, what should she do?
Actually, it quit simple, if she able to pay the 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 off 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 different?
What she can more?
If she really wants to go for it, she could increase the amount of her "new" self-imposed minimum required monthly payment. For example, if she were to start paying an additional $18.63 a month for a total of $200.00 a month.
Could you see how’s a few changes in payment can speed up the debt relief and save you a significant amount of money?
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