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Reduce Your Credit Card Debt and Save Money

Are you only paying the minimum payment each month? If you increased your payment amount every month by as little as $10, you could pay down your debt much faster.

What happens if you only pay the minimum monthly payment each month? The chart below illustrates how much longer it takes to pay off a credit card bill if you only pay the minimum amount required by the lender each month. In this example, the scenario has been simplified for illustrative purposes, no additional charges have been made to the card during the repayment period, and this example does not factor in a monthly finance charge. Accumulating finance charges makes the time even longer.

Elapsed Time	2% Minimum Payment	Principal Balance (after minimum monthly payment is made) 0% Interest Rate	New Principal Balance (after $30 monthly payment is made) 0% Interest Rate
1 month	$20.00	$1000.00	$1,000.00
2 months	19.60	980.00	970.00
3 months	19.21	960.40	940.00
4 months	18.82	941.19	910.00
5 months	18.45	922.37	880.00
6 months	18.08	903.92	850.00
7 months	17.72	885.84	820.00
8 months	17.36	868.12	790.00
9 months	17.02	850.76	760.00
10 months	16.67	833.74	730.00
11 months	16.34	817.07	700.00
1 year	16.01	800.73	670.00
2 years	12.56	628.36	310.00
3 years	9.86	493.09	Paid in full by month #34
4 years	7.74	386.96
5 years	6.02	300.89
6 years	4.72	236.11
7 years	3.71	185.27
8 years	2.28	114.11
9 years	1.79	89.55
10 years	1.41	70.28
11 years	1.10	55.14
12 years	.87	43.27
13 years	.67	33.96

This table tells the grim story. If you pay the minimum monthly payment of 2%, it will take you 13 years to pay off this debt. At the end of 13 years, would you remember what you'd bought with that $1,000? Would you still own any of those items? However, if you pay $30 every month, you're able to pay the principal off in 34 months.

>It's Your Choice

The credit card business provides a very useful and beneficial service to cardholders. These companies make money, lots of money, when you let your balance linger by either making payments later in the billing cycle or only paying the minimum payment amount each month. Could you pay an additional $10 each month to pay your debt back faster? Would you rather pay accumulating interest fees to the creditor or pocket the money? It's your choice. You can give the credit card company more of your hard-earned dollar or keep it for yourself.

This article is one in a series about Credit Cards. For further information, see our related articles listed in the Library section.