If you make the monthly minimum payment on your 14% interest rate credit card balance, it will take 25 years to payoff this debt and you will pay in interest charges more than the original amount.
You should always pay more than the minimum payment due on your credit cards, student loans and other consumer debt. As your credit card debt balance decreases, your minimum payment due will decrease and your payments will stretch out. If you make the monthly minimum payment on your 14% interest rate credit card balance, it will take 25 years to payoff this debt and you will pay in interest charges more than the original amount.
There are amazing benefits to climbing out of credit card and student loan debt. Paying off debt takes a plan and patience to execute it.
- Figure out how much debt you owe. You cannot make a plan to pay off your debt until you know exactly how much you owe.
- Decide what to payoff first. Best option is to pay all the minimums, but pay more money on the card with the highest APR. The “snowball” method is the most efficient approach. It’s essential for you to get started.
- Negotiate down the APR. call the credit card company and ask for a lower APR. if successful, you can save a significant amount of money.
- Decide where the money to pay off your credit card will come from, like balance transfer (a band aid for a larger problem, your spending habits), 401(k) or home equity one of credit (HELOC), or reducing spending to prioritize debt reduction.
- Get started. The goal is action, not paralysis by analysis. Get started executing your plan and you can always find tune it later.
Being in debt means giving up choices and having reduced options; it means staying at a job you hate because it pays good money; it means not being able to build a decent savings account. It means delaying or foregoing implementing your plan to achieve financial freedom.
“Good debt is a powerful tool. But bad debt can kill you.” ~ Robert Kiyosaki
Debt can be a tool, as long as it is used to buy assets. And, statistically speaking, debt in America is normal. Only 50 percent of households reported any credit card debt, while credit card companies reported that 76 percent of households owed them money,” wrote Binyamin Appelbaum of the NYT
Seventy-five percent of Americans claim that they don’t make major purchases on their credit cards unless they can pay it off when the balance is due. Yet when looking at data of actual spending behavior, over seventy percent (70%) of Americans carry a balance.
It appears most people have no idea how much they actually owe or have any idea what their debt payoff date is.
Most people don’t get into serious credit card debt overnight. Instead, they accumulate debt little by little overtime until they realize they’ve got a serious debt problem.
Getting rid of credit card and student loan debts is hard, but very necessary to build wealth and achieve financial freedom.
Without a debt management plan, that requires knowing both the amount of debt you owe and the projected payoff date, you will more than likely be controlled by your debts.
The good news is that credit card and student loan debts are almost always manageable if you have a plan and take discipline steps to control and reduce it. You have to plan and take action paying off you credit card and student loan debts.
The number one mistake people make with their credit cards is carry a balance, or not paying it off every month. Since the key to utilizing credit cards effectively is to pay off the balance in full every month.
It is difficult for someone to achieve financial freedom if they always owe and have excessive debt.
Use credit only to purchase things of lasting value: a home, an education, maybe a car. Pay cash for everything else. To quote Knight Kiplinger, “Do you know anyone who got into big financial trouble because they didn’t borrow enough money?”
Once you’re out of the debt hole, you can avoid that predicament again, explains bankrate.com. Here are some rules to live by:
- Set a budget and stick to it. Live within your means.
- Avoid impulse purchases.
- Shop around for the lowest price before making a big purchase.
- If you use a credit card, pay off the balance each month to avoid interest charges.
- Keep your finances organized and keep a close eye on your bank balances.
- Stay away from “buy now, pay later” and “interest-free financing” offers, which just defer your debt.
- Save money. Try to set aside a certain percentage of your income to be swept into savings.
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