Sanderson M. Smith

THE CREDIT CARD TRIP

This is simply an illustration of what can happen when you attempt to pay off credit card debts by small payments each month. Suppose you have \$10,000 on your card, the annual rate is 18% (or 1.5% a month), and you make monthly payments of \$200. Here's a two year schedule:

 Month Payment (\$) Interest Owed (\$) Principle Repaid Principle Outstanding 0 0 10,000.00 1 200 0.00 200.00 9,800.00 2 200 147.00 53.00 9,747.00 3 200 146.21 53.80 9,693.21 4 200 145.40 54.60 9,638.60 5 200 144.28 55.42 9,583.18 6 200 143.75 56.25 9,526.93 7 200 142.90 57.10 9,469.83 8 200 142.05 57.95 9,411.88 9 200 141.18 58.82 9,353.06 10 200 140.30 59.70 9,293.36 11 200 139.40 60.60 9,232.76 12 200 138.49 61.51 9,171.25 13 200 137.57 62.43 9,108.82 14 200 136.63 63.37 9,045.45 15 200 135.68 64.32 8,981.13 16 200 134.72 65.28 8,915.85 17 200 133.74 66.26 8,849.58 18 200 132.74 67.26 8,782.33 19 200 131.73 68.27 8,714.06 20 200 130.71 69.29 8,644.77 21 200 129.67 70.33 8,574.45 22 200 128.62 71.38 8,503.06 23 200 127.55 72.45 8,430.61 24 200 126.46 73.54 8,357.07 TOTALS 4,800 3,157.07 1,642.93

After two years, you have paid a total of \$4,800 in payments, you still owe \$8,357.07, and you have paid \$3,157.07 in interest (which is 31.57% of the amount you originally owed... and you aren't done yet!)

If you continue this table for two more years, you will find that at the end of four years,

\$5,819.75 = interest you have paid (58% of what you originally charged).

\$3,780.25 = amount of principle you have paid.

\$6,219.75 = what you still owe (you haven't even paid off half of what you charged).

YIKE!

Moral of story: Use credit cards wisely.