Paying the minimum payment as directed by your credit card company will keep the credit card companies happy and off your back, many feel.
But this is not why they are happy with you. They are most happy when you don’t actually pay the balance off at the end of each month! People know this but many choose to overlook it. Some can’t but many just won’t pay it.
How does it affect you when you don’t pay it fully?
Take a balance of €5,000 and at 18% interest on an average credit card. If a you pay €100 each month off this balance you are their best customer, they love you. If you continued to pay this each month and didn’t even spend any more on the credit card it will cost you dearly.
Here are 3 scenarios to consider on the above details:
- Pay €100 pm on €5,000 and you will end up paying €9,311 in total and it will take you 7.8 years to pay off!! What’s more is that €45 of your €100 each month is made up of interest!
- Raise payment to €150pm and you will bring repayment term to 3.9 years with total interest cost of €1,984
- Raise payment to €200pm and reduce more to 2.7 years and interest cost of just over €1,300
So, keep this in mind when you get your bill. Only spend on your credit card if you can pay it off each month. Pay off fully each month and you are not giving them anything in charges. Go out of your way to do this and you will keep more of your money for yourself. Make it an important thing to do each month.