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Paying the minimum on credit card debt a bad idea

New Jersey residents may know that credit card debt may be difficult to pay off. This might result in a long-lasting debt that never seems to go away. Yet, paying off the bill slowly may make the difference between seeing the original amount double or even triple.

A $50,000 credit card debt with 24 percent interest rate may take 42 years to pay. This might happen if the credit card holder only pays the minimum amount due each month. In this case, the final amount paid for charges totaling $50,000 would be $99,363.04. In the beginning, the principal amount, $50,000, is large, and the minimum payments are high, averaging about $1,500 per month. As the principal goes down, the minimum payments decrease. With smaller payments, catching up on the debt takes longer.

One way to pay off credit card debt is to pay the same payment every month. Using this example, paying $1,500 per month on a $50,000 principal will take less than 60 months to pay. The final payout will be $83,220.87.

One way to avoid high credit card debt is to try to save as much as possible. Ideally, having six months worth of expenses in case a financial downturn occurs may make it possible to use a credit card less.

Some individuals, particularly when the economy is bad, find it difficult to pay off credit card debt. Losing a job, or being unable to work due to illness, are both reasons this may happen. Even a minimum payment is too much, and a credit card account may be placed in collections. Consulting an attorney to see what options are available might be beneficial. The attorney may offer insight into choosing bankruptcy to eliminate most consumer debt.

Source: FOX Business, “Fastest Way to Pay Down $50K Credit Card Debt“, Steve Bucci, July 31, 2014

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