So, it is that time of the month again, to break out the checkbook or the debit card and start paying the bills. However, if you are like many people, you have opened up your credit card bill and cannot figure out why you cannot pay that bad boy off. After all, you are making your monthly payments, right?
It just seems like that is just a bill that does not ever diminish, or it decreases too slowly based on the payments you are making. Visit our credit card calculators page and specifically our credit card payoff calculator page to view some detailed statistics on how long it will take you to pay off your credit card.
There are a couple of reasons that your credit card bill may not be reducing at a rate that is fast enough to show a difference month to month and often the primary reason is your interest rates. High interest rates make it very difficult to pay down credit card debt quickly.
With the national credit card average interest rate being over 15%, it is no wonder that these rates keep your payments from making a dent in your credit card debt. If you have bad credit, then you may be paying interest rates as high as 36% (although some states set a maximum rate a credit card company can charge), which could seriously impact your efforts to pay off your credit card debt.
Another reason that your monthly payments may not be greatly influencing your overall debt is because of additional fees. There are several fees that your credit card company may charge to your card. One such fee is a maintenance fee. This is a fee usually between $5 and $10 that is applied monthly to your card.
In addition, you may have an annual fee, which some companies apply in monthly installments rather than once a year. This gives them the opportunity to charge you interest on these additional fees. If you make your credit card payments online, you may also be charged a convenience fee, which many companies bill to your credit card rather than to your payment method, which also increases your credit card balance.
Paying Off Your Credit Card
If you can, eliminate your problem with your credit card altogether and pay off your card completely. You can do this a number of ways; if you have savings, use money from savings. If you can get a lower interest loan, consider doing that to pay off your loan. Alternatively, you could let us find a low interest credit card with no fees for you and transfer your credit card balance to a better card that will be easier to pay off. Just be careful not to get into a game of rotating balances that can negatively affect your credit.
If you cannot afford to pay off your debt in full, then you need to increase the amount of money you are paying each month to your credit card company. Making your minimum payment will add time and money onto what you owe and the more you can increase your monthly payment, the faster you can get that card paid off. Again, switching to a credit card with a lower interest rate and without fees will ensure that you pay off your card even faster.
Another thing, if you are keen to pay off your credit card debt, then you need to stop using your card. Yes, it is a conundrum, in order to establish credit you have to actually have credit, however, you also need to show you are responsible with your credit in order to improve your score, so the lower the amount you owe on your credit card, the more responsible you will appear to potential creditors and loan institutions.
The Time it Takes to Pay Off a Credit Card
The amount of time it takes to pay off your credit card is difficult to establish simply because there are so many cards and so many situations to consider. There are many credit card calculators online that you can use to assess this.
However, here is a quick run down of the time frame you can expect from a $2,000 debt at a 15% interest rate making the minimum payment (the standard is 2% of the balance, which is $40). That means that $25 of each payment will go towards the interest and $15 will count towards the principle. At this rate, without any additional annual or monthly fees, you will pay off this card in six years and seven months. You will also have aid an additional $1,159 in interest on top of your initial $2000 debt, making the total paid $3,159.
However, if you double your monthly payment to $80 a month, you will see a significant reduction in the amount of time it takes to pay off your credit card. What’s more, you will also see significant savings as well. At $80 a month, it will only take you two years and seven months to pay off your credit card. In addition, your interest payments will only equal $413 making your total payments $2,413, a savings of over $700.
As you can see, the more you pay the faster you are going to pay off your debt and the less you will pay towards that debt. Of course, if you have a higher interest rate then your payments are going to take longer and if you have a lower interest rate then it will be shorter. However, with a lower interest rate, you may see a less significant change in the time it takes to pay off the debt, but you will see a great reduction in what you pay in interest. For example, the same debt at 10% interest with an $80 monthly payment means that your debt will be paid in two years and five months. While that is not a huge time difference, the savings are apparent when it comes to interest paid. Instead of $413 in interest, your interest payments will be $252.
How to Find a Better Deal on Your Credit Card
If you are paying a higher interest rate or monthly fees, you may be wondering what is the best way to get a better credit card. Alone this could be a long process and you may never find the best deal possible on a credit card. Not because you are not smart enough to do it, but because there are so many different credit cards that it is impossible for a single person to find them all.
That is where we come in. With our “Chaser” tool, we find you the right credit cards to match your criteria. We can find you credit cards for people with no credit, poor credit, average credit, good credit and more. If you are interested in rewards cards, we will show you every card that fits your criteria. All you have to do is fill out our chaser tool form and let us do the work for you.
In this day and age, saving money is important and no one wants to throw money away on high interest rates and monthly credit card fees. Let us do what we do best and find you the perfect credit card today.
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