Daily Web Money

Do you have too much credit card debt?  There are a lot of people don’t realize that by paying back only the minimum payment each month, they are really paying nearly double, and in some cases triple what they owe because of the finance charges that the credit card company adds to their bill each month.   With most companies, those finance charges are actually calculated on the daily balance rather than the monthly balance.  This can result in a considerable amount in finance charges being charged each month.

Let’s say for instance that you are paying on a credit card with a balance of $9000, and your interest rate on that card is 24.99%.  If you pay the minimum payment set by the company of $260 a month, you would actually only be paying about $95 a month on the balance, and the other $165 of the payment would pay the finance charges.  In the long run, to pay off this bill at the set minimum payment of $260 a month, it would take you over 5 years to pay it off, and you would actually pay around $16120 total.  That is a whopping $7120 in finance charges that you would have paid.

This can be quite overwhelming for those who have several of these cards with high balances and high interest rates.  There are a couple of things that can be done to help pay them down without paying as much in finance charges.  If you are making the payments on time, and can afford a little extra each month to pay on the credit cards, then you can start what is called a pay down system.  If that is not an option, or you are currently behind in your payments, then you could try to get the companies to take a lower payoff than what you owe.  Keep in mind that getting them to take a lower payoff can reflect negatively on your credit score.

Next - Your Two Best Options to Reduce Your Credit Card Debt