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How Much is Credit Card Debt Costing You?

How Much is Credit Card Debt Costing You?

Credit card debt – it’s something that hangs over many Americans. According to the Federal Reserve and the America Saves program, in April 2013 the average credit cards debt equaled $3,364 per U.S. adult. This assumes that every adult has a credit card and that those cards carry debt. But not all adults own a credit card.

Young Americans are among those ditching their credit cards and not all households with credit cards carry a balance each month. The only way to reduce credit card debt is to make payments each and every month. To reduce this even faster you should pay more than the minimum payment each month.

By only paying the minimum monthly balance, you are guaranteed to extend the amount of time it will take you to pay off your credit card and increase the amount you will pay. Take this example:

Total Credit Card Debt

Monthly Payment

Years to Pay Off

Total Cost

$3,364 (at 14.96% Interest)

$67.28 (min. payment)

19 Years 5 Months

$7,618.63

$3,364 (at 14.96% Interest)

$87.28 (min. payment +$20)

4 Years 4 Months

$4,533.67

$3,364 (at 14.96% Interest)

$107.28 ((107.28 (2 Monthsent +$20)Meetingyou orriginally neimum balance of redit card and the amont you a credit card. Take for example min. payment +$40)

3 Years 4 Months

$4,225.11

$3,364 (at 14.96% Interest)

$167.28  ((107.28 (2 Monthsent +$20)Meetingyou orriginally neimum balance of redit card and the amont you a credit card. Take for example min. payment +$100)

1 Year 1 Month

$3,841.40


         In this example, finding an extra $100 a month to apply to credit card payments reduces the time it will take you to pay off this debt from over 19 years to just over 1 year and saves you nearly $4,000.

CNN Money offers a free calculator online to see how long it will take you to pay off your credit card debt. You can see how long it will take if you only make the minimum payment, how much you will save by paying more, and you can find out how much you will need to pay each month to be debt free in a time period you designate.  Analyze your credit card payments at:

http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp

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