How To Eliminate Credit Card Debt
Consolidate Credit Card Debt
Personal Finance And Why You Should Care
News reports show that over 70% of American consumers are either paying their minimums each month on their credit cards, or are playing the “alternating late payment game”. When this is combined with the mortgage crisis collapse, this paints a very dire picture for American credit usage, and may be the tipping point on a recession as consumer buying habits shift and change.
No matter what your financial situation is, there are some positive steps you can take to make it better. Doing so requires some basic education on fundamentals for personal finance.
The first fundamental is that credit issuers charge interest on money that’s lent. Yes, yes, you already know that – you read the small print on your credit card statement. Let’s explain what the implications of interest are – especially if you’re doing “alternate late payments”.
Financial institutions use a mathematical principle called the Rule of 72 for interest rates. Take 72, divide it by the interest rate in percentage points, and you get the number of years needed for the cumulative interest to equal the amount of the initial loan. For example, if you’ve got an 18% interest rate, and an average balance of $1,000, in 72/18 = 4 years of paying off that balance in dribs and drabs, you’ll have paid $1,000 in interest.
The average minimum payment on a credit card debt typically stretches your payment terms out to 30 to 35 years! You can see where the banks profits are coming from…and why most credit and financial counselors urge everyone to pay off their highest interest cards as soon as possible, and then try to live 10% under their income, putting the rest into a savings plan.
(When you put money in the bank, compound interest works the same way – but in your favor. Divide 72 by the interest rate you’re getting and that’s how long it’ll be before the interest equals your initial investment.)
Excessive Credit Card Debt and more here Card Credit Debt Problem.
So - take the time to look at your credit card statements, and what you’re earning. Look at your spending habits. If you hit up Starbucks every day, that’s almost $150 a month that can go to debt reduction. If you eat out for lunch every day, start packing a lunch in – and use the rest to get out of debt. If you’re buried under a mountain of debt, look at getting a debt consolidation loan or talking to a credit counselor about getting on top of your credit again – before you end up in a hopeless situation.
