While swiping the credit card is a very effective way to pay without using any type of paper money, it has led many people into a debt trap.
Majority of people simply look at whether or not they can afford their monthly repayment when using at their credit cards. Many of them don't even try to figure out how long it will take to pay them off and how much they are costing them over the long run.
For instance, $2,000 doesn't seem like a huge balance on a credit card. In that case at an 18% interest rate, your payment is only around $40 a month. Sounds pretty affordable at the moment, doesn't it?
Well, if you take a closer look at the number, approximately $30 of your payment goes towards interest. As a matter of fact only $10 is paid towards the $2,000 balance each month.
In case if you are only paying the minimum balance each month, it will take you over 30 years to pay off that $2000. Thirty years, that is too long. In addition you will have paid back $5,000 in interest in that time. Therefore your $2,000 credit card bill will really cost you $7,000 including interest in the long run.
The above payment does not include the extra payment incur in the case when you miss or delay your monthly repayment. In fact, many credit card companies are hoping you will miss your repayment so that they can charge you with extra interest and late payment fee and this would normally extend your payback period for the rest of your life.
There are many credit card debt calculators available on internet and you can use these calculators to calculate how long it will take you to pay off your current credit cards by using the minimum payment method. You will normally be shocked. And it is worth for you to put effort in finding ways to reduce and pay off your credit card debt.
If your credit card debts are reached to an unbearable stage; then, you may need to get service from a debt consolidation company to consolidate all your credit card debts. They are widely expert in dealing with creditors and help you to negotiate with your creditors for a better repayment plan. Follow the plan to pay off your credit card debts.
Credit cards have successfully minimized the use of paper money and become one of the most convenient ways to make payments for a shopping spree or while traveling. Though, if not used with restraint they may soon lead to a huge mountain of debt which leads you to a tizzy of financial woes. In simple terms credit cards are a really costly form of credit. If you must have one, paying off the balance in full each month so that you will not trap into a credit card debt.
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Frequently Asked Questions
Improving credit score after debt consolidation?
By: Snowgirl | 24-07-2008
How do I improve my credit score after coming from debt consolidation program? I recently called all my creditors and closed my credit card debts but my score remains fair. I don't know where to start from here?
When is debt consolidation necessary? is it really ...
By: Johansen8 | 24-07-2008
when is debt consolidation necessary? is it really necessary? why? which debt consolidation companies to choose from?
Raising credit rating
By: kathy | 24-07-2008
I have 4 credit cards all close to being maxed out with hogh interest rates. They are $15,000, 5,000, 3,000 and 2,000. I am taking a home equity loan to pay them all off. What is the best way to raise my credit rating? 1-pay them all off in full or 2- pay them to 50 % of the max one month and the balance the next month?
Is no credit good or bad?
By: iamarealperson2 | 23-07-2008
If I have no credit at all, then what do I have to do to establish my credit?
Bankruptsy?
By: moneta | 23-07-2008
I have 2 morgages and can't sell one house, Bankruptsy?
Is there a questionaire for us that allows us to BUY STOCKS ACCORDING TO OUR PREFERENCES?? ...
By: rsps4115 | 23-07-2008
Is there a questionaire for us that allows us to give our criteria such as, (goals?, NO FUNDS?, MONIES TO INVEST?, ARE THERE DIVIDENDS.? What is p.E. Of bus?, ETC. Etc. Etc.?? And out pops 10 - 20 stocks recm. To buy??? What web site would have such a quiz ?? Aol, google, yahoo, etc. ?? Please send answer to p.S.S. Rsps4115 @aol.Com thank you
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