Making Minimum Payments Is Like Taking Out An Auto Loan For 33 Years!
Most consumers that have excessive credit card debt are making minimum monthly payments
. And that puts a huge grin on the face of the credit card companies!Your creditors structure their offers of credit in such a way that entices you to only make the minimum monthly payment. They will do everything in their power to get you to continue making minimum payments.
For example, your monthly statements don"t say "maximum payment due", but rather "minimum payment due". They take advantage of the fact that most people live paycheck to paycheck.
Also, as long as you"re making your payments on time, the creditors are quick to bombard you with offers of higher credit limits. They could care less if you got laid-off and have a stack of bills to pay! All they want is to bury you further and further in debt.
Why would they want you to make only the minimum payment? Because about 98% of the payment is applied to the interest, not the principal! This is why your balance seems to never decrease. For many, the balance grows due to additional credit card usage, fees, penalties, etc.
Consequently, if you have $30,000 of unsecured debt, and you are making minimum payments, and your average interest rate is 18%, it will take you about 33 years to pay-off your debt! But your creditors won't disclose this information on your monthly statements.
To prove this, see creditcards.com . Click on "credit card calculator", then "minimum payment calculator", and input the required information to determine the pay-off duration.
If you took-out an auto loan and the loan officer told you that the term for the $30,000 car was 33 years, what would you think? For more information, please follow the link provided.
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