Constant Credit Card Payments
Are you trapped into making only minimum payments on your credit cards? I hope not.
Minimum payments decline as the balance on the credit card declines.
Let’s take a credit card with a $2000 balance at 15% interest to use as an example. You would expect to pay about a $40 (2%) monthly payment when you start making your payments:
By making the minimum payment only, it will take you 13 years and 11 months to pay off your credit card and you would expect to pay $2,126 in interest.
However, if you continued paying that $40 until the credit card was paid off, it would only take you 6 years and 6 months to pay off the credit card and you would pay about $1,100 in
interest.
You could save over $1,000 in interest and pay it off in half the time. This is what simply starting with a set payment and sticking to it could save. If you can afford that $40 payment when you start, odds are it won’t hurt you later.
Now, let’s take that a step further. What if you paid just $10 more, $50 instead of $40?
That same credit card could be paid off in 4 years and 7 months with only $740 in interest.
Here is how it breaks down:
Minimum Payments – $4126 total payments – 13 years 11 months
Paying $40 per month – $3100 total payments – 6 years 6 months
Paying $50 per month – $2740 total payments – 4 years 7 months
The fact is that every dollar you add to your payment goes toward the balance of the credit card.
I recently completed a Debt Elimination Summary for a couple that had $46,500 in credit card debt on 6 credit cards. Most people would be considering filing bankruptcy in that situation but this couple were determined to pay it off.
Here are the results of the Summary:
They were already paying $785 per month on the credit cards. They decided they could afford to pay another $200 to eliminate their debt sooner.
Minimum Payments – The credit cards would never be paid off.
Paying $785 per month – $78,761 total payments – 8 years 5 months
Paying $985 per month – $66,059 total payments – 5 years 8 months
Would you have thought that you could pay off over $46,000 in credit card debt in just 5 years and 8 months? I’ve seen this done dozens of times. It can and it does work if you stick to it and quit using your credit cards.
If you have multiple credit cards and would like to pay them off as quickly as possible the best way to do this is to write down your credit card name, balance, interest rate and minimum monthly payment.
Then you must decide which credit card to pay off first. There are two schools of thought on this. Most experts believe that you should pay off your highest interest credit card first. You would definitely pay less in the long run.
However, if you need to see results quick to give you an incentive to keep going you could start with the credit card with the lowest balance.
Which ever way you choose, simply add as much money as you can spare to that credit card until it is paid off. Then take the amount you were paying to the first credit card and add it to the next credit card payment and so on until they are all paid in full.
Interest, late fees and penalties are wasted money. The only way to avoid this is to use cash to make your purchases when ever you can.
Watch the video related to credit card payment
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August 7th, 2009 at 11:34 am
Here is how you could see that it is best to pay highest APR first. Suppose you have n credit cards, and your initial debt on card k is d(k), and the interest on card k is i(k) per payment period. Then if you simply didn't pay anything on any of the cards (ignoring late penalties etc), after l payment cycles you would owe:
sum_{k} (1+i(k))^l d(k)
Now suppose you make a payment of p(k,m) to the kth card in the mth payment cycle. As a result of this payment you will decrease the debt you owe after l cycles from above (assume m<l) by:
(1+i(k))^{l-m} p(k,m)
To decrease your debt the most you thus need to pay the card with the highest interest rate i(k). This problem could be made more complicated, as someone already suggested, if you had introductory rates and such (ie. the interest rate depended not just on the card k, but also on the payment period m, i(k,m)).
August 7th, 2009 at 12:38 pm
The answer is 174 months
here is the steps for the excel
you will have 4 columns, A,B,C and D. You will also have 174 rows.
Cell A1, type 3000
Cell B1, type =IF(A1*0.03<15,A1-15,A1*0.03)
Cell C1, type =A1-B1
Cell D1, type =C1*(1+0.195/12)
Cell A2, type =D1
Drag all four columns down to row 174 by clicking and dragging the little box in the bottom right corner of all row 1 cells. There's your spreadsheet.
August 7th, 2009 at 2:56 pm
Your health always comes first. As for the creditors calling you, just send a cease and desist letter. That will end the calls. Make sure you send 1 regular 1 certified. and make a copy of each creditor. Since you're not a homeowner and do not have savings account, I doubt if they'll take you to court. If the certified letter come back unsigned, do not open them.
August 7th, 2009 at 12:06 pm
This is Amazing.
August 9th, 2009 at 7:11 pm
You are OVER YOUR LIMIT technically you owe them a payment until brought within the limit.
You do of course know you are in for a huge over the limit fee as well which continues to keep you over the limit until you pay.
YOU are in the wrong the original creditor has different guidlines over a collection agency.
YOU ARE WRONG get off your high horse.
August 10th, 2009 at 1:35 am
Only if your state has some sort of consumer protection statute that governs how original creditors, such as credit card companies, can collect a past-due account.
The Federal Fair Debt Collection Practices Act doesn't apply, as it only governs third-party debt collectors, not original creditors.
I would suggest talking to your credit card company's loss mitigation department and seeing if you can work something out. They are usually willing to work something out.
August 10th, 2009 at 4:12 am
Here's what I think. Peace of mind is more valuable. I have been through something similar and found that all the litigation to be long and torturous. I let go of it all and have begun to restore my sanity through the concept of Karma. His, not mine. Justice will happen although perhaps through unknown ways. In my case, he married a gold digger who got nothing but toxic waste. He was miserable. LOL Anyway, I have never been happier, bankrupt but happy. Let it all go and realize that you are better off.
August 10th, 2009 at 4:43 am
It could go either way, I guess, yes you could sue them. But, their defense would be, we have a legit reason. At the long run, you'll spend more time and money on attorneys.
For now I guess, the best bet is to trying to set up some sort of arrangement for with them. Because, they'll start adding late fees, and other types of fees.
If that doesn't work, you'd probably would have to consider one of those credit counselor services.
August 10th, 2009 at 5:49 am
This is how to do an amortization schedule:
Label the chart as follows:
column 1 = Principal balance due
Column 2 = interest rate
Column 3 = month's interest (annual interest divided by 12 months)
column 4 = this month's payment
column 5 = date today
First, in first data row for your loan, you would have
5063.71 =.089/12 (=col 1 x col 2) 208 7/28/09
copy down columns 2 thru 4, highlight the date & use the command Edit, Fill, Series, Date, Month so that it will automatically label each row with one payment per month.
In column 1, the formula the second data row would be:
= starting principal + interest – payment
Copy the formula for the new principal loan amount to all of the other ones below it. The loan is paid off when the principal amount is 0.
You'll pay off the loan in August 2011. The total of the interest column will tell you how much in total interest you paid to borrow this money.
You shouldn't pay only the minimum on your credit card. They are asking you for a minimum payment of this month's interest ($3) plus 2.4% of the principal. Why in the world do you want to give them that much money in interest over the life of the loan? If you only pay $103 a month on that debt, you'll still be paying until nearly 2013!
August 10th, 2009 at 7:48 pm
Don't bother to send those $25 payments. That $359 minimum payment is the amount needed to put you below your limit. If you can't come up with that amount, you are better off not paying at all. Your small payment will not stop them from sending you to collections or suing. It only keeps resetting the Statute of Limitations (SOL), the timeframe to bring lawsuit.
It is very likely BOA assigned you account to collections previously. They may be about to sue you at this point or maybe they will be selling the account to another collection agency.