This is American, but explains in simple terms what happens if you just pay the minimum payments each month!
How Minimum Payments Won’t Get You Out of Debt
If you happen to have a fairly large amount of credit card debt and you are only making the minimum payment each month. You certainly will not be paying off that debt in the near future, which is what you really should be doing. By making only minimum payments, you could find that it could be 10’s of years before you are able to clear that debt. In this video you will clearly see just how much you are paying off, you think that the amount is of debt is going down, but that interest soon bumps up the figure again!
How Much Do Credit Card Companies Make From My Minimum Payments
As you will see in this video below, you will see that on a £10,000 debt, by making the minimum payment, your debt has been reduced to £9,858 and you could be feeling good that it is going down. BUT, you have to remember that there is still interest to pay on the debt. In this particular case this bumps up the total amount outstanding to £9,999. So hey presto as if by magic the credit card company got all of your money, except for one lousy pound.
So if this cylce continues into the next month and you make the minimum payment to your credit card debt, this situation will mean that you have now only paid off £2 off the total debt to the credit card company.
One Year of Minimum Credit Card Debt Payments
So now if we fast forward to on year of making the minimum payments of £142, you will have paid the credit card company £1846 and you will still owe the credit card company £9,995. So after 1 year of making minimum payments, you will have reduced your payments by a lousy £5. So if we now fast forward another year, hey good news, you will have reduced that debt by another 5 lousy pounds!
After 25 Years of Making Minimum Payment to Credit Card Debt
So after 25 years of making the minimum payment, you will have actually paid the credit card company £42,742. Wouldn’t you love to get that sort of payment for all the hard work that you have done? Well, that is what the credit card company gets for very little effort.
How Much to Pay off a Debt at Minimum Payments
So for the privilege of being able to borrow £10.000 on your credit card, after 36 YEARS of minimum payment to pay off the card, you will have paid a whopping total of £61,060 , just to pay off £10,000
Watch this video to see how long and how much it will cost you!!!
Should I Pay More Than the Minimum Payment on my Credit Card?
YES, obviously it is nice to have access to extra funds via the use of your credit card. However, to really benefit you should really pay more than the minimum payments each month. This post and video will show you, just how much you will end up paying, if you only pay the minimum amount each month to your credit card.
Like with all the information on this site, do search out additional advice from as many sources as possible. At Johnny Debt we have tried to ensure that the information is as correct as possible, at the time of writing.
Reducing Your Debt Faster
If you want to reduce your debt faster, then perhaps this post on Using the Snowball Method to Reduce Debt. Alternatively you might also find the Avalanche Method of Reducing Debt a better method for reducing your debt faster.
The Debt Advice Handbook
If you are seriously in debt, I would recommend the Debt Advice Handbook. This is a very serious book, for a very serious situation!
|Debt Advice Handbook To understand the law relating to Debt, this is a must have book! It contains the essential information needed by advisers dealing with debt problems.||
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|How to Get Out of Debt is an eight-stage strategy that enables readers to pay off debt and fix their finances for good. This book has it all covered.||
|How to Live for Free - I have done a full review on the book here: How to Live for Free||
|The Money Diet - revised and updated: The ultimate guide to shedding pounds off your bills and saving money on everything!||
|Bankruptcy, Insolvency an the Law is a concise guide to the processes underpinning bankruptcy and personal insolvency.||
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