Sanderson M. Smith
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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,
$9,600.00 = your total payments.
$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.
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