Beware Paying the Credit Card Minimum PaymentWritten by Johann Erickson
Need a new iPod? The computer store running a special this week? Want that new outfit? Got to have that CD? Before you reach for your credit card and make that impulse buy, think for a moment. The payments won’t be much? Think again. Paying only minimum payments on your credit cards can cost you.
“But,” you say, “my balance is low, and with this purchase, it will only be $1,000. I can pay that off in no time!”
Well, if you enter Twilight Zone and never again use card for any purchases, are never late, and go over your credit limit, you can pay off card by making minimum payments. It’ll only take a little under five years! Just fifty-eight short months of your life, costing you $154.48 in interest charges, that is, if your card rate is only six percent.
But what about higher rates? Generally, higher interest rate, more you pay and longer it takes to pay off card.
But what about higher rates? Generally, higher interest rate, more you pay and longer it takes to pay off card.
Everybody knows that, you argue. Everybody uses credit. Well, true, nearly everybody uses credit, because it seems like we’re not really spending our money, but someone else’s. Plastic is deceptive.
Most folks do make impulse buys, rationalizing that they can pay off their card balance in a short time. But life happens to best repayment plans. Think you’ll never get sick, fired, laid off or downsized? Do you drive a forever car that will never need major repairs? Think again. And when these things happen, minimum payment beckons like a shining solution.
But is it?
Hardly. Let’s say that you had several cards, all having a $1,000 balance at different interest rates. Note long repayment times, assuming, unrealistically, that you never make another purchase with any of these again. Check chart for repayment times and interest rates.
| | Moneynet adds weight to intelligent finance with new personal finance product guidesWritten by moneynet
Moneynet adds weight to intelligent finance with new personal finance product guidesMoneynet.co.uk, UK’s longest established online personal finance information website, has recently published three online product guides to help consumers get to grips with increasing complexity of personal finance products. With a strong stance on ethical finance, company felt it was important to be proactive on educating consumers about different aspects of credit related products to get best deal. This is crucial, as a recent report by Credit Action indicates that less than half of adults are financially literate, which drops to a third for young adults aged between 21 and 24. According to National Statistics website, 91% of men and 90% of women in UK have at least one credit card, collectively accumulating over £54.3 billion of debt. Credit Action, a national money education charity, states that 50% of people who take out credit in shops, hadn’t planned to do so
|
