Debt Reduction – Credit Card Debt High & Minimum Payment set low!

Why do credit cards have such low minimum payments?

Are you ready for it?    Drum roll please….

The low minimum payments amounts allow consumers to carry more debt while keeping to the same low minimum payment. 

The lower the minimum payment, the deeper in debt someone could be in.

Based on income – Someone with the ability to pay $100 per month could qualify for a credit limit as high as $5,000 as long as they only had to pay 2% a month.  If the minimum payment is increased to 5% then the credit limit would drop to $2,000.

In addition to the higher credit limit more interest will ultimately be paid by the consumer.  E.g. $1,500 with the min 2% payment of $30 will take just under 8 years to pay off!  Interest paid $1,866 does not include cash advances or other charges. 

The links below steer you to excellent calculators to help you understand the cost of borrowing.  The debt calculator demonstrates methods to pay off debt  more strategically.  While the second calculator, Credit Card Payoff estimates how long it will take to pay off a credit card balance with minimum payments versus what the payment and interest costs will be if you want to pay off the card in a specific time frame – e.g. 2 years or 24 months. 

I personally have downloaded and regularly use these calculators and find them helpful.

Debt Reduction Calculator        Credit Card Payoff Calculator

Visit www.Vertex42.com for Debt Calculators and more