The Real Cost of Credit Card Interest Rates
I looked at a credit card statement the other day. In addition to the total amount due, it also states the minimum amount due. We all have times where we would like to pay the minimum amount on the credit card and use our money elsewhere. Don't do it!
The statement also has a Minimum Payment Warning. The tells you how long it would take to pay off the credit card, if paying only the minimum and not purchasing anything else on the card. It also tells you the total amount that would be paid in using this strategy.
On this particular card, I had purchased plane tickets that cost $2,500.00. The card interest rate is 18.25%. If I decided to pay off this card using the minimum payment plan, it would take me 13 years to pay it off. And my total cash outlay would be $5,056.00. Because of the interest rate charged, I would pay back to the credit card company double the amount charged on the card.
It is no wonder people get into financial trouble quickly. Credit card usage is one area of personal finance everyone needs to pay attention and manage well.