Say No to Credit Card Minimum Payment

Let us face it. Most of us own at least one credit card if
not more. Getting a bill every month is always an agonizing experience because
that makes us realize how much we have spent. Often we end up realizing that we
didn’t need to spend that kind of amount or worse still, realize that we cannot
afford to pay the entire amount due that month. So we end up making the credit card minimum payment, hoping
to clear the balance next month. We repeat this exercise the next month too,
and the next month and the next month…till we are caught up in a vicious circle
where we pay only credit
card minimum payment. This doesn’t bother many of us since making credit card minimum payment doesn’t
affect our credit report. We seem to take it in our stride and let the
to-be-paid amount to pile up till we have a huge credit card debt to pay off.

 

It’s not uncommon to pay credit card minimum payment. In
fact a whooping thirty percent are paying only the credit card minimum payment. For
the first time users credit
card minimum payment means the lowest amount that we can pay to make our
account stay in good standing. While credit card minimum payment helps
us to pay our debts without getting a bad credit report, it somewhere down the
line also makes us to take our debt for granted. Opinions are much divided on
this issue.

 

However one thing that stays true is that if you are just paying minimum credit card
payment you are being sucked into a circle of debt and possible
bankruptcy! The credit
card minimum payment is calculated as a percentage of your current balance. The
credit card
minimum payment drops as your balance is paid, but thanks to the magic of
compounding, you'll end up paying for a long, long time. This is something that
most people are not aware of and end up paying minimum credit card payment only.
So not only do we keep piling up huge debts to be paid but are unaware of the
hidden cost that we also have to pay while paying minimum credit payment.

 

Earlier the credit card minimum payment used to
be around 2- 2.5%. However some time ago US government has increased this
percentage to 5%. This was because people would make only credit card minimum payment, thus
increasing their debts. To make people pay up their debts faster the government
took this step to increase the interest rate. And it seemed to have worked like
a charm! Many people are now shelling out more than merely paying minimum credit card
payment.

 

It is better to pay off full payment than paying credit card minimum payment if you
wish to save your hard earned money because if you go for the minimum payments,
that will in the end will take you to a big lump sump amount to be paid which
will leave you helpless and you will find no way out other than paying it and
loosing your hard earnings in one payment.

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