The Ten-Dollar Solution to Eliminate Credit Card Debt

By Matt Jackson

Credit card debt is not a new phenomenon but it is an increasing problem. More and more people rely on the regular and often poor use of a credit card. The temptation to spend to the limit and repay the required minimum on a monthly basis are so overwhelming that many of us now have several credit cards that are all maxed out. By paying just $10 extra every month it is possible to nearly half the interest you will have to pay and the length of time before you eliminate credit card debt. Now that's good value for money.

How a $5,000 Debt Takes Longer to Repay than Your Mortgage

Minimum repayment values are a trap set by credit card companies to earn as much as they possibly can. A $5,000 credit card with 15% APR and minimum repayments of 2 percent or $10 will take a staggering 32 years to completely repay if you make only these minimum repayments. By this time you will have paid nearly $8,000 in interest charges alone. In order to repay a $5,000 credit card debt you would be making the minimum repayments for longer than you will probably be making mortgage repayments and the total amount you repay would increase to over $12,500.

Controlling Credit Card Debt

This is clearly a lot of money to be paying for what may have been unnecessary purchases. Obviously, the first thing to do in order to control and subsequently eliminate credit card debt is to stop using credit cards except in absolute emergencies. The convenience of a credit card often means that it will be used in preference to cash or even debit cards. Put your credit card away somewhere secure and only ever use it when you have no alternative and it is absolutely essential.

The Minimum Repayment Pitfall

The second step is to look at your monthly repayments. By paying only the 2 percent minimum you are paying very little of the actual capital you borrowed in the first place. A majority of your repayment is simply clearing the interest you have accrued. This does mean, though, that any extra you can pay off each month will make a huge difference.

The Ten-Dollar Solution - Eliminate Credit Card Debt

Using the same situation as before, by paying just $10 on top of the 2 percent minimum repayment the total time it takes to repay your debt will be halved to just 16 years. Most people can afford $10 extra every month. The amount of interest to be repaid will also be nearly halved to less than $5,000. This still isn't ideal but it is a serious improvement. If you can make a $25 payment on top of the minimum repayment then your debt will be repaid in less than 10 years.

Credit Card Debt Conclusions

If you are faced with a lifetime of repaying your credit card debt then remember that you’re not alone. Credit card lenders are experienced at encouraging people to borrow more and repay less. This way they receive a much larger amount of money from you in the long run. However, by paying slightly more than your monthly minimum repayments it is possible to reduce 30 years of repayments down to 20 or even 10 years. Look at your finances and you should be able to find an extra $10 without falling short on any other payments or bills.

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