Accruing credit card debt is easy—paying it off is not. Like it or not–credit card companies count on their customers’ inability to pay off their debt, because this is how they make their money. As such, they make it very easy for individuals and businesses to keep their debt around as long as possible, by only requiring a minimum payment each month.
The minimum monthly payment on your credit card statement is reflective of the interest that has accrued and a small percentage of the outstanding balance. This percentage is usually somewhere around 2%, although this does vary from one credit card to the next. While this may seem like a good deal at first–consumers who routinely pay just the minimum payment are falling into an age-old trap that can have catastrophic effects on their future.
If you owe $10,000 in credit card debt and have a 15% interest rate, your minimum monthly payment would likely be close to $200 a month. For many individuals in debt, this payment can be made each month and their account kept in good standing. Yet if you ONLY pay the minimum required, it will take you 30 years to pay off this balance—and you would’ve paid more than $15,000 in interest alone!
The above scenario perfectly illustrates why paying just the minimum monthly payment is damaging to your future. If you are like millions of other Americans, you will be unable to keep the $10,000 credit card debt from snowballing over 32 years. Unexpected expenses, natural disasters, and life changes will undoubtedly occur during that time, causing many consumers to add even more onto their debt. The result is a debt that becomes out of control and is nearly impossible to pay off.
If this sounds familiar, it is important to know that you are not alone—and there are ways to get out from under crushing credit card debt. If you are serious about reducing your debt and regaining financial freedom, there are numerous debt reduction methods you can employ to reduce your outstanding balance. Even paying an extra $50/month towards your debt can help you save thousands in accrued interest payments.
What Credit Card Companies DON’T Want You to Know
Credit card companies are in a business to make money. They do this by making it very easy for consumers to keep spending—and by employing a declining minimum payment method. Unlike traditional fixed rate loans, the declining payment method is designed to make your payments smaller as your balance gets lower—thus taking you longer to pay off the balance. The result is millions in the credit card companies’ pockets.
You can set a “fixed” payment to be paid each month—and drastically reduce your credit card debt. In the above scenario, if you paid the same $200 a month (instead of just the minimum declining payment), your $10,000 debt would’ve been paid off in just 6.5 years. In addition, you would’ve saved nearly $10,000 in interest costs alone!
You can see the difference for yourself by using this online credit card payment calculator. Put in your debt and interest and compare the difference between using a fixed payment method to pay off your debt versus accepting the credit card company’s minimum monthly payment method.
For Overwhelming Debt Consider Bankruptcy
Getting out of overwhelming debt is sometimes as simple as making a phone call—and your first phone call should be to an experienced Northern Virginia bankruptcy attorney. Your attorney can examine your assets and your debts and determine if you qualify for filing bankruptcy. Even if you do not wish to pursue bankruptcy, your attorney can help you examine all of your legal and financial options.
Contact Northern Virginia Bankruptcy Attorneys
At Tyler, Bartl & Ramsdell, P.L.C., we know how hard it is to get out of debt. That’s why we offer our legal services to all individuals and businesses that are looking to get out of debt the right way—while still maintaining good credit scores.
For over 25 years Tyler, Bartl & Ramsdell, P.L.C. has helped thousands of individuals and businesses find freedom from crushing financial debt. Call today for a free consultation at (703) 549-5000 or fill out ourconfidential contact form.