Since it may seem like you’re saving money by paying the minimum amount due on your credit card, the reality is, you’re really paying much more. This time of the year more than others, the temptation to only pay the required balance and convincing yourself you’ll have more cash to spend on gifts and yuletide cheer is a problem for a lot. No matter the amount of debt you currently have, this info will show you the need of paying more than the minimum – something that could save thousands of dollars over time. How’s that for a stocking stuffer?

From time to time I have been questioned many times if it is better to have a debt consolidation loan or many credit cards, some with zero APR. The first thing you need to decide is how quickly you want to pay the debt off. The best piece of advice is that you pay it off as fast as possible. Let’s have a look at the effects of making the minimum monthly payment on a credit card.

With lots of credit card companies are being friendly and allowing even lower minimum payments you may think this is a good thing. And you might be right if you are really broke, but watch out, it is costing you a lot in the long run, which knowingly is why they do it. Yes, I know it is a surprise, you thought they were just being friendly! Unlike a debt consolidation loan that has set monthly charges (Assuming rates don’t update), you can vary the monthly payment on a credit card. For example, if you have a credit card balance of 3,000 with an APR rate of’ percent (Annual Percentage Rate) and the minimum charge allowed is 3%. In this case the minimum monthly payment is 90. By making this charge and not using the card for anything else, it will take 12 years and 5 months to pay off this card, and you will have paid a total of 2,714.16 in interest!

So, the next month you receive a letter with your statement saying that you are such a great customer they are going to lower the minimum payment to 2%. Great, you think, I’ve only got to pay 60 month and I can use another 30 down the pub. But lets see at what you are really paying. By making the new minimum charge only, it will now take you 28 years and 5 months to pay off your debt and you will be paying a whopping total of 7,845.73 in interest. This is an extra 16 years and 5,131.57 in extra interest, rather an expensive trip to the pub I would say. So, maybe the credit card company isn’t being so friendly after all, maybe a debt consolidation loan with it’s higher monthly charges isn’t such a terrible suggestion.

Oh yes I can hear you wondering, but what about the credit card with no interest, well, that is another topic, but basically a lot people forget to change at the end of the period and end up with high interest.

With this in mind I would suggest you to pay more than the required payment and pay of the credit card debt as soon as you can. If you’re unable to pay even the required, a debt consolidation loan with a smaller interest rate and a shorter period or debt settlement may be options to consider.

Will holiday shopping have your credit tapped out, debt options from Debt1Options is a great way to lower credit card debt today.

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