Tuesday, March 30, 2010

Credit is Scary

If you have credit cards, and sadly most people do, you've probably noticed changes in your monthly statements.  Now, they have this very helpful section that shows you how long it will take to pay your balance off, providing no additional charges are made, if you just pay the minimum each month - and then how long it will take to pay it off, as well as how much you will save, if you pay just a bit more. 

To quote the Minimum Payment Warning:
If you make only the minimum payment each period, you will pay more in interest and it will take  you longer to pay off your balance.

Which, of course, we all should know already, but the table makes it extremely clear:

Our balance on this particular card is only $505.  If I'm reading this correctly, this is saying that it would take 18 years, and we'd end up paying 8 times what we owe, if we just paid the minimum ($10) every month.  That is absolutely ridiculous!!

Of course, this doesn't completely apply, because we got 3 years/no interest - so as long as I pay the balance off before the promotion expiration date, we pay no finance charges.  Of course, if I fail to pay it off before the expiration, they sock us with the deferred interest - which is more than the remaining balance at this point.  I'm definitely paying this one off before that date!
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