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Cost of credit card interest

Q. If I don't pay off my balance in full, how much will it cost me in interest?

Interest accumulates daily whenever someone carries a balance on a credit card. Federal law requires credit card companies to process payments the day they arrive. So the sooner you send in your payment, the less interest you're going to pay.

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Paying only the minimum will cost you an exorbitant amount of money in interest and take forever to pay off. For example, if your credit card has a $5000 balance with 15 percent interest rate, it will take you 21 years and five months to be rid of your debt if you only pay the minimum. In that time, you will pay $4,757.98 in interest.

You can cut interest and pay off your balance quicker just by freezing your minimum payment. If your current minimum payment is $150, then commit yourself to paying $150 or more each month until your card is paid off. Your card company will drop your minimum payment requirement as you chip away your balance. Ignore it. Stick with your frozen minimum payment and watch your debt melt away.

You can find out the true cost of paying the minimum on your account by using this Bankrate calculator.

 

 
-- Posted: Aug. 14, 2002
   

 

 
 

 

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