The minimum payment on your credit card bill may save you from overheating your brain by actually thinking about what you’re doing, but it’s no way to reduce your debt. AllFinancialMatters lays out the math.
Consider this simplified scenario.
Interest Rate: 12%
Minimum Monthly Payment: 2% of outstanding balance
Debt After 5 Years: $2736
“What’s worse, your TOTAL payments over those five years are only about $500 shy of your beginning balance,” says AllFinancialMatters.
Whereas, if you pay $100 each and every month, you’ll only owe $917 after 5 years.
Takeaway: “Don’t fall for the minimum payment trick. Instead, pay as much as you can, as often as you can. You’ll be happy you did.” — BEN POPKEN
Don’t Get Sucked Into the Minimum Payment Trap! [AllFinancialMatters]