Understanding Credit Card Debt

Are you in credit card debt and only making the monthly minimum payment on your credit cards? If so, you will be paying a lot more than your original balance and your payments will last for a long time.

This chart shows how much you'll pay and how long it will take to become debt free if you pay a 2 percent monthly minimum payment on your credit card. Note that even with interest as low as 12% on a $1,000.00 debt, you'll end up paying an additional $373.00 in interest and it will take you 5.7 years to pay it off. With higher interest rates, the payments last longer and you'll pay more.

Consider paying just a little more toward your debt with the highest interest each month and you'll save significant time and money. This chart shows that with as little as an additional $10 payment per month, you will pay much less interest and will pay for a much shorter duration.

Minimum Payment Comparison Chart $1,000 Credit Card Balance Interest Rate 12% 13% 14% 15% 16% 17% 18% 19% 20% Total if you pay monthly minimum (2%) $1,373 $1,425 $1,482 $1,546 $1,620 $1,704 $1,804 $1,924 $2,073 Years to pay off the loan 5.7 6 6.2 6.4 6.75 7 7.5 8 8.6 Total if you pay monthly minimum plus $10 each month $1,208 $1,231 $1,255 $1,280 $1,308 $1,336 $1,367 $1,400 $1,435 Years to pay off the loan 3.3 3.42 3.5 3.57 3.63 3.7 3.8 3.9 4 By paying $10 more each month, you save this amount $165 $194 $227 $266 $312 $368 $437 $524 $638 Source: National Endowment for Financial Education