Analysis Of Credit Card Debt

1133 words - 5 pages

Analysis of credit card debt
By: Corrine Owens
M3A2
9/15/15

Analysis of credit card debt pg.1

Based upon a balance of 5,270.00 on an APR of 15.53% the calculation is as follows per US BANK: $256.85 per month will pay off your credit card in 24 months.
To pay off your credit card balance of $5,270 in 24 months you need to pay $256.85 per month. This includes your additional monthly ...view middle of the document...

00, in fact it was one of my first cards, I made minimum payments on it and if I recall correctly, my APR was something like 22.9% because I did not have established credit at the time. My minimum payments were $25.00, I always paid at least $50.00 per month however, this was up until I lost my job, and then I was only able to pay the 25.00 minimum, during this time and for approx. 20 months proceeding, $438.00 was the total cost in interest I had to pay extra on top of my already 500.00 credit limit. I have the statement right here in front of me with this information on it, and a warning to customers to avoid paying only the minimum to avoid having to pay such a huge amount in interest. When people pay more than what is minimally due, they pay towards the principal balance, and there for most
Analysis of credit card debt pg.3
credit cards and loans alike, will be able to pay their debt a lot quicker. This specific card that I have charges an annual fee of $79.00. They call it a membership fee. There was no special rate applied to this card. The 22.9% will stay that way, but the credit line could increase in the future based on good payment history. The $79.00membershipe fee applies, even if the card is not used during the time you have it.
Let’s say I had a credit card with a $1,000.00 credit limit and my APR was 25%. Let’s say I maxed it out and now I only paying the minimum payments which are $25.00 per month over a period of 12 months. At this rate, I will be paying a minimum of 20.83 interest per month, because the recommended amount that should be being paid to avoid extra interest would be 95.04 per month. The way credit cards work are that one should pay not only the minimum, but always a little extra so that the debt can be paid off in a timely manner, and many penalties and fees can be avoided this way also. If I paid $25.00 a month on a $1,000 credit card balance, it would take me 60 more payments or 5 years to pay off the remaining balance. The interest would be $675.00 additional per year. I have attached a graph to show you what I mean:
By only making minimum payments it will take 60 more payments or 5 years to pay off the remaining balance. Interest will amount to $675. I attached a graph as follows: See graph on following page...

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