Credit Card Minimum Payments on the Move
Perhaps you’ve already heard the news - Credit Card Minimum Payments are on move and that’s UP not Down! For many people, this is enough to create havoc as they struggle to maintain their existing minimum payments.
Here’s the philosophy behind the decision to literally double the minimum payments (from 2-4%): National banks are regulated by the OCC (The Office of the Comptroller of the Currency). There’s been a great concern that people may literally carry balances forever as the existing minimum payment requirement will never be enough to payoff the balances in full. Good point!
Let’s look at the numbers:
Scenario A: $5000 Balance, 20% Interest Rate, 2% Minimum Monthly Payment $100 - If you ONLY made minimum payments, it would take you 799 months (66.58 years) to payoff the balance in full AND you would pay $23,086.37 in INTEREST.
Scenario B: $5000 Balance, 20% Interest Rate, 4% Minimum Monthly Payment $200 - If you ONLY made minimum payments, it would take you 160 months (13.33 years) to payoff the balance in full AND you would pay $3469.01 in INTEREST.
THAT’S A BIG DIFFERENCE and hopefully people facing the dilemna of "thinking" they may not be able to increase their payments will see these numbers and realize that it’s not entirely impossible to arrive at a solution. What it’s going to take is the creation of a spending plan because it’s the lack of a spending plan or budget that got most people deep in credit card debt to begin with! It’ll also be important to make a resolve to only use credit cards when you know that you’ll be able to pay the balance in full when the payment is due.
People are robbing themselves blind of future financial security financial freedom by giving into their whims through the use of credit cards. They are definitely a necessity in our society but you’ve got to have a plan in place around responsible use of credit cards and be fully knowledgeable on the TRUE COST OF BORROWING. Be sure to tell everyone you know about what their credit card debt is REALLY costing them!
Any questions, feel free to email me at coach@debtfreediva.com
Dee Dee Sung
www.debtfreediva.com
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