If you are carrying charge card debt from month to month you really need to address this before other types of debt.
Find out the effective interest rates you're paying on the various accounts you have and chances are, the charge cards will be the highest; often in the 20-30% range.
Compare this to your home mortgage, if you own your home, which is probably closer to 6 or 7 percent.
Most charge cards require you to pay between 2.0 and 2.4 percent of the outstanding balance each month.
Failing to make even one payment by the due date will typically result in a hefty penalty, often $30, $40 or even more.
More importantly, the credit card issuer will usually reserve the right to change your terms as a result - so you can expect to be charged a higher rate, maybe much higher.
Assuming 19% interest and minimum monthly payments of 2.1% you can see from these numbers (courtesy of CNN Money.com) that a sizeable credit card balance can take a lifetime to pay off - literally.
| Charge Card Debt | Money Paid Back | How Long it Will Take! |
|---|
| $10,000 | $26,276.59 | 42 years 9 months |
| $15,000 | $55,370.41 | 48 years 11 months |
| $20,000 | $74.464.22 | 53 years 3 months |
| $25,000 | $93,557.98 | 56 years 7 months |
| $30,000 | $112,651.77 | 59 years 4 months |
| $35,000 | $131,745.58 | 61 years 8 months |
| $40,000 | $150,839.39 | 63 years 9 months |
Scary? Before you decide to get a charge card with a $10,000 limit, ask yourself if you can really avoid carrying a balance.
Just remember the 42 years and 9 months of making payments it would take to pay of the card if you run it up to the limit and make the minimum payments!
