When you receive your credit card bill every month you may notice on the statement that it shows what your minimum payment for the month is. The minimum payment represents a percentage of your total balance. That is then deemed the minimum that you must pay per month. It is a small percentage of your total balance, and is generally around three percent. If you were to only pay the minimum every month then it would take you many years to pay off your balance.
The thought of having to spend years and years making credit card payments can be discouraging, especially when you consider all of the interest that you will end up paying overall. However if you cease to use your credit cards and you really put your focus and effort into paying off your debt then you can turn your circumstances around. Depending on how high your credit card balances are it may take some hard work and sacrifice on your part to make things right but you can improve your situation. It will also involve some changes in how you live your life (i.e. your spending habits) but in the long run it will be worth it.
Stop Using Your Credit Cards
What you need to do right now is to stop using your credit cards. Do not assume that because you are making your minimum payments every month that you are doing all right financially. Too much credit card debt can cripple you financially and it can limit you when it comes to applying for a mortgage or a car loan. If you really look at what you use your credit card for you will realize that more often than not you have purchased a good or a service that has no lasting value attached to it. That is why spending on a credit card is rarely a smart choice. It is often an easy choice and a convenient one but it can come with a very high cost to you.
Pay More than the Minimum = Get Out of Debt Quicker
To get out of debt you must begin to pay more than the minimum monthly requirement. Increase your payments as much as you can. If you usually pay $25 a month then increase it to $50 or $100 if you can afford it. If you possess more than one credit card then increase the amount you pay on one card at a time but continue to make the minimum payments on the other one at the same time. It can be too overtaxing on your income to try to increase the monthly payments on more than one card all at once. The more you pay the more financial power this puts back into your hands.
Once one credit card is paid in full then move onto the next card and do the same thing with this card. You might want to consider transferring your balance to a card that boosts lower interest (if you find out that you could be paying less interest than you presently are).
3 – Reasons Why Paying More than the Minimum is Strongly Recommended
Making the minimum payment may seem easier and may cost you less in the short-term but in the long-term you are losing a great deal. Here are a few reasons why paying more than the minimum each month is smart:
1. You will save money when you pay higher amounts on your credit cards every month. In terms of the interest you could be saving yourself hundreds or even thousands of dollars. Try to look at it from that perspective and ask yourself how much the minimum payment is really costing you.
2. The longer a period of time it take you to pay off a credit card the more of a burden it is to you. The finance charges are bad enough but consider this- the sooner you pay off your card the sooner it becomes a debt that you no longer have to think about.
3. You never know when you may need to use your credit card again. You will free up credit if you make more than the minimum monthly payments. On the other hand if you pay only the minimum amounts and something comes up then you have to look elsewhere to buy whatever it is you need.