Paying Credit Card Interest Is Like Throwing Cash Into the Fire

by Guest Contributor · 4 comments

This is a guest post from Tisha Kulak, a writer who writes about credit card offers, personal finances and credit card matters.

Credit card interest can be a financial killer if you are not handling your credit cards correctly. If you are only paying the minimum amount of money on your cards each month, you are setting yourself up for a large financial downfall. Imagine you carry a balance of $5,000 in credit card debt with an average interest rate of 16%, it would take you at least 12 years to pay off the balance. The balance would increase about $2,500 with interest fees, leaving you with a total bill of $7,500.

$2,500 could afford you many other things in life. That amount of money would pay for home repairs, a nice vacation, or an excellent deposit into a savings or retirement account. Paying that amount of money as an interest payment on credit cards is like using your cash for firewood.

There are steps you can take to help getting your credit card debt under control. Here are a few tips to keep you paying down your balances and not wasting your hard-earned money.

Stop Making New Purchases
You can never expect to pay down a balance if you keep adding new things to it. Use credit cards only for emergency purposes.

Get a Handle on What You Owe
Debt can be overwhelming and embarrassing; however, you will never be able to recover from debt without knowing how much you owe. Sit down with all of your bills and tally up your debt. Get a real picture of where you stand financially, no matter how bad the situation is.

Pay Card with the Highest Interest First
The cards you have with the highest interest rates will cost you the most over time. Start making your budget to include more than the minimum payment each month of the cards with the highest interest.

Keep Away from Penalties and Fees
Getting momentum to pay down your balances on high interest cards can be ruined if you are late. Being late or going over the limit on your card can cause your interest rate to skyrocket and therefore will thwart your plans for paying off your balance.

Consider a Transfer
If you have a low or 0% balance transfer credit card that can handle a balance transfer, it may save you a lot of money by transferring the high-interest balance to a card with a low or no interest.

Once you begin to realize the effect your effort makes on your debt, it will become easier to see the light at the end of the financial tunnel. Planning your family budget will be more realistic and you can anticipate a time period when your balance will be paid off. Once you have paid a balance in full, continue to use the amount you’ve been paying and pay towards the new balances of the other cards. If you do not have any other cards to pay off, take the payment amount you’ve been used to paying and stash the cash away in a savings account or other investment that is right for you.

Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs. Click here for the current Verizon FiOS promotion codes and promos to see if you can save more money every month from now on.

Related Posts

{ 4 comments… read them below or add one }

payoff125k May 30, 2008 at 8:57 am

Indeed.. this concept hit home a couple months ago when we realized how much debt we had and decided it needed to get paid off. It’s insane how much credit cards are costing us.

Reply

David Carter June 1, 2008 at 11:34 am

I think your title says it all. That sentence would have been sufficient for the post. The rest was just gravy.

Reply

Emily @ Taking Charge June 2, 2008 at 7:49 am

No kidding — it really can be an endless black hole. A co-worker recently told me that when he got his very first credit card many years ago, he bought a pair of running shoes with it, but didn’t really know how it worked. He ended up owing $3,000 in late fees and interest. Pretty good way to learn how credit cards work.

Reply

Garry kerr June 19, 2014 at 7:59 am

cards are highest interest rates will cost you the most over time,budget to include more than the minimum payment each month of the cards with the highest interest.

Reply

Leave a Comment