So your credit card accounts come in, and you’re looking to be in pretty good financial shape. The minimum repayment is only £35, a walk in the park. You write the cheque, and send it off, content that you’ve done the responsible thing in paying on your credit card just as you’re told. There’s a black hole in this scenario, though, and it’s one that’s swallowing up your hard-earned cash. There’s a very good reason that you should never pay JUST the minimum monthly payment on your credit card account.
Take a look at this scenario:
You owe just under £2,000 on your best credit card account, the one with an interest rate of just 14% APR. Your minimum monthly is £35. If you continue to pay off this credit card by paying only the minimum payment each month, it will take you 111 months to finish paying it down to £0 – if you don’t ever charge another thing to it. In that 111 months, you will pay back £3437 – £1437 of it in interest alone. Mind you, this scenario is accurate if you continue to pay £35 even as your minimum monthly payment drops over the months. If you pay ONLY the new minimum, this scenario could stretch out to twenty years or more.
If you take the bit between your teeth and bite down hard on it though, and manage to make just double that current minimum payment each month – £71 – you’ll have paid off your original £2000 in just three years – less than one third the time it would take you otherwise. Your interest charges over those three years will be £435 – a full £1000 less than if you continued to pay your credit card off at the current monthly minimum payment.
Increasing your credit card’s monthly payment to double the minimum payment due can slash the amount you’ll pay and the length of time it will take you to clear it up by two-thirds. If someone offered to save you 66% on your credit card bills, wouldn’t you take it?
There are other ways to reduce your credit card debt, and get it under control and eliminated fast. One of those ways is to make sure that you’re carrying the balance on the best credit card for paying off balances over time. That 14% interest rate is a standard APR for ‘beginner’ credit cards granted to those who have yet to establish their credit-worthiness. If you’ve maintained a fairly clean credit record with no or very few late or missed payments, chances are very good that you’d qualify for a 0% or low APR balance transfer credit card. These have become among the most popular cards on offer here in the UK, and you’ll find a variety of balance transfer offers available. Some will grant you a 0% APR on the transferred balance for as long as it takes you to pay it down to nothing. Others offer an introductory rate for 3 months to as much as 9 months, where every penny that you pay will whack right off the principal amount. Any of those offers could save you nearly all of the interest charges that you’d be paying – AND get that debt wiped out faster.
In order to find the best credit card offers, you’ll need to do some shopping around. You can find and compare credit card offers at comparison sites, where you’ll also find lots of information about managing your credit cards and choosing the best credit card for your needs.
