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Credit > Credit Cards > Cost of Carrying a Credit Card Balance |
How much in interest charges does a credit card balance accumulate over the years? This can be illustrated using the following assumptions: (1) The current balance due on a credit card is $3,000; (2) the card will not be used any longer; and (3) a monthly payment of exactly $100 will be made each month until the balance is paid off. |
APR |
Total Interest Paid # of Monthly Payments |
$960 $881 $806 $735 $666 $602 $540 $480 $423 |
40 (3 years, 4 months) 39 (3 years, 3 months) 39 (3 years, 3 months) 38 (3 years, 2 months) 37 (3 years, 1 month) 37 (3 years, 1 month) 36 (3 years) 35 (2 years, 11 months) 35 (2 years, 10 months) |
As the above table illustrates, a person with a 9% APR credit card will pay less than half the interest rate than a person with a 17% card. Naturally, increasing the monthly payment will result in less interest charges and a quicker pay-off; however, paying only the minimum required payment each month will significantly increase the amount of interest and pay-off period. How much? The table below uses the same terms given above, except the monthly payment has been reduced to $50. Notice the increase in pay-off time and interest: |
APR |
Total Interest Paid # of Monthly Payments |
$3,789 $3,115 $2,613 $2,219 $1,897 $1,626 $1,395 $1,193 $1,015 |
136 (11 years, 4 months) 123 (10 years, 3 months) 113 (9 years, 5 months) 105 (8 years, 9 months) 98 (8 years, 2 months) 93 (7 years, 9 months) 88 (7 years, 4 months) 84 (7 years) 81 (6 years, 9 months) |
The Cost of Carrying A Credit Card Balance |
17% 16% 15% 14% 13% 12% 11% 10% 09% |
17% 16% 15% 14% 13% 12% 11% 10% 09% |
Pay off your credit card debt as quickly as possible. Give up purchases you don't need so that you have an extra $20, $30, $40 or more to pay towards your credit card debt each month. |
Credit > Credit Cards > Cost of Carrying a Credit Card Balance |
Debt Kit -- Settle unsecured debts for less than half of amount owed Credit Kit -- Improve your credit rating and reduce monthly payments by $200+ |
