Worry about getting rid of your debt? If so, why do so many people only pay the minimum on their credit cards if that's the case? Is it because they think that if they keep making the minimum payment every month, it will pay itself off in a few months? Well, that's not true, and we need to fix this problem quickly.
- The minimum payment is GBP40, which is 2% of your balance. If you only pay the minimum payment, most of your GBP40 will go toward interest and not much toward your bill.
The minimum payments have gone down because credit card companies and banks used to charge 10%, but they found that customers paid off their debts much faster without the 10%. So, they lowered the percentage of the minimum payment to get us to pay more interest. We thought they were helping us, but in reality, they were just getting more money from us by adding more interest, making it take longer for us to pay off the credit card bills.
So, if you find yourself in this situation, here's what to do:
Don't use your credit card any more, or better yet, cut it up (in case you get tempted) Sit down and figure out how much more you can pay than their minimum payment. Once you know how much, stick to it, even if the minimum payments go down. If you cut your payment, you'll be back where you started.
If you have more than one credit card, the best way to pay down your debt is, once again, to stop using them. Find the one with the highest interest rate and pay the most on that one. Keep making the minimum payment on your other cards, and when the card with the highest interest rate is paid off, move on to the next highest card, and so on, until all of your cards are paid off.
You may have to tighten your belt for a little while, but in the long run, this will save you a lot of money. Yes, we all need credit cards, and they're fine if you use them right. But if you can't pay them off at the end of the month, you'll run into all kinds of problems.
