We all know how useful having a credit card is. Some of us use them on impulse to buy at any rate we want, others to pay for household appliances, general repairs, goods or sets, and others to substitute carrying large sums of cash in one’s wallet. at any rate your particular reason, you need to be aware of the following.
Credit cards are not free money. Along with charging products and sets to a credit card may come accrued interest and certainly a minimum payment at the end of your billing cycle. The interest accrued is the amount you are charged for borrowing your creditor’s money. And for most credit cards, the interest for purchases is accrued daily. This can add up to a sizable amount if you’re not careful about your credit expenditures.
Now let’s get into a little more detail by looking at a few scenarios. If you charge a large lump sum during the month, let’s say $3000 at 14% interest, you could end up having to shell out, a minimum of $90 per month based on 3% of your balance. If you only pay the minimum payment, it will take you 43 months to pay off the loan. That’s about 3.6 years of loan payments and at a tune of $821 of interest over the time of the loan.
Another scenario is to pay more than the minimum, let’s say $180 a month, double your minimum payment. It would take about 19 months to pay off your balance. That’s just over 1.6 years at a tune of $356 of interest over the time of the loan.
The third scenario is to shoot for paying off the loan within 12 months. If you were to pay $290 monthly for 12 months, you will have paid $216 of interest over the time of the loan.
Now of course the third scenario is the best. As long as you are able to provide the $290 monthly payment, the wiser choice would be to pay the least amount of interest for borrowing your creditor’s money. If you have more funds obtainable to throw at the minimum, go for it. It doesn’t matter if you fluctuate the amounts just make them as much more than the minimum as you can. In the long run you will be saving many dollars in interest.
Another way to save dollars in interest is to find the lowest interest rate credit card obtainable. You should search for a major credit card that suits your needs and lifestyle. And if there are no or very low fees attached, try transferring higher interest balances onto lower interest credit accounts.
popular Tip: If you have no prior month’s balance, you can pay the current month’s balance in complete with no interest accrued. Remember when I said credit cards are not free money…well here is one example when it is.