The best way to pay off your credit card is by making sure that you’re not just paying the interest on it every month but also considering how much money can be saved in monthly payments. It’s recommended for people who are struggling with an outstanding balance and need more time than 36 months (or less) before they feel like their debt has been completely settled again – unless, there are extenuating circumstances like severe financial hardships or other problems which make this impossible.
While making the minimum payment looks affordable on a monthly basis, it can cost you thousands of dollars over time.
Using the percentage-plus-interest calculation on a $2,000 balance at 20% APR and a 1% minimum payment would take you 186 months, that’s 15+ years! Plus, it will cost an additional $773.45 in interest charges if charging nothing else during your repayment period.
The cash advance fee alone will cost you $130 per month, and the fact that credit card companies can charge an extra 3% to their customers for using this option is unbelievable. If we add these fees up over time, they total 4%. This could be avoided if there were better protection features in place!
The flat-percentage calculation is a little more favorable at 153 months until payoff and $2,110.93 in interest.
You can save money and speed up your time to being debt-free by paying more than just the minimum payment.
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