Pay off your credit card debt – immediately!

On May 2, 2012 by Andy Bandy Man

Let’s assume you have $5,000 in credit card debt at the national average interest rate of 15% (though some cards charge upwards of 20 or even 25%). Guess how much interest you will pay if you don’t pay your bill off in full at the at the end of each month?

HERE IS WHY YOU NEED TO PAY OFF YOUR CREDIT CARD DEBT AS SOON AS HUMANLY POSSIBLE

  • If you pay the minimum amount of $150 a month (assume you are required to pay 3% of credit card balance): It will take you 14.5 years to pay off your debt, and you will end up paying $3,365 in interest in addition to the $5,000 you owe.
  • However, if you pay $300 a month rather than the minimum $150 a month: It will take you  1.5 years to pay off your debt, and you will end up paying $642 in interest in addition to the $5,000 you owe.
  • If your pay your card in full every month: Obviously, you will have no debt and owe $0 in interest (while building your credit and collecting the various benefits and perks associated with having a credit card)

Before you even START thinking about retirement accounts, investing in stocks, paying off student loans, vacation planning - make sure that you are completely free of credit card debt!  As of May 2012, your bank account probably pays somewhere around 0.1% (in the case of BofA) to 0.5% interest for money they borrow from you when you make deposits. Why are you paying 30 to 150 times as much to the credit card company??

Check this out if you want to calculate for yourself how much money you are donating to the credit card companies, and how long it will take you to get out of credit card debt. Finally, if having credit card debt is completely unavoidable, at the very least you should call your credit card company and negotiate a lower interest rate - it could save you hundreds of dollars. Literally, just call them and threaten them that you’ll borrow the money from your dad and switch credit cards if they don’t lower your rate, and see what they say.  NOTE: 90% of the time when I do end up getting a discount or a successful negotiation from a credit card / cable / telephone company, I have to speak with the manager – so be persistent and don’t be afraid to ask!

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