A poor economic climate means that if consumers are able to pay toward their credit card debt at all, they are much more likely to pay only the minimum payment. In effect, this means that those consumers will remain in debt for much longer and will end up paying nearly as much in interest as the amount of the original debt. In many cases they will pay more in interest than the original debt.
The average American household carries approximately $8000.00 in credit card debt. Calculated based on an interest rate of 12.99 percent where the payment represents 2 percent of the balance and interest, that debt would take over 30 years to pay off if only paying the minimum payment each month. The total interest paid on this amount of debt would add $10,667.00 to the original debt making the total paid $18,667.00.
Struggling with paying down debt seems to be more the norm than the exception in these days. Whenever possible it will save the consumer in the long run to use every extra dollar to pay more than the minimum payment toward credit card debt beginning with the highest interest rate card first. As that card is paid off, the money that would have been used as the minimum payment toward the card should be added to the minimum payment on the next highest interest rate card until all balances are paid off.
Making only minimum payments toward credit card debt should only be done in the event of extreme financial hardship. Consumers who are consistently only making minimum payments are in for a long and difficult time and should strongly consider debt consolidation services.
