What Happens if You Only Make the Minimum Credit Card Payment
So there I was looking for a deal at one of my favorite stores. Its been hot here in Montreal so I need a few more tops so I go to Joe Fresh (they are not paying me to say this!). I found a few items and paid $71 for 3 great tops.
While in line to pay a lady in front of me was speaking with her friends and when the cashier rung up all of her purchases it come to over $300. No problem. Once the lady paid she look at her friends and nervously chuckled, that with all the shopping that they did today she’ll make the minimum payment on her card. Ok, queue the freak out. What?! She was PLANNING to only pay the minimum?
This got me thinking about what happens if you only pay off the minimum on your credit card.
Let’s break this down:
NerdWallet crunched the numbers and determined the interest costs of paying off debt. It assumed credit card debt of $6,081, which is what the average household with revolving credit card debt owes, and an interest rate of 14.99 percent.
Here’s the breakdown of how much interest would accrue if you:
Just make the minimum payment: $4,064
Make double the minimum payment: $1,509
Make the minimum payment plus $100: $1,409
Here’s how long it would take to pay off $6,081 worth of credit card debt if you:
Just make the minimum payment: 169 months (about 14 years)
Make double the minimum payment: 65 months (about 5.5 years)
Make the minimum payment plus $100: 41 months (about 3.5 years)
SO the moral of the story is, if you can’t afford it, PLEASE don’t buy it. If you do buy it, TRY to pay off the bill at the end of the month - your future self will thank you.