Carrying a Credit Card Balance Will Cost You.
By Chuck Bentley
If you were to take the family out for dinner tonight, and after enjoying your food and fellowship sign an agreement to take out a mortgage loan to pay for the meal, you would likely think that was crazy. However, if you are carrying a $5,000 balance on your credit card and making the minimum monthly payment with a 15 percent interest rate, it is likely you will be paying for that meal for the next 18 years.
According to Bankrate.com, a low interest rate on a credit card balance today is 11 percent. In reality, that is a much more expensive rate than your home mortgage rate! I am not against the use of credit cards. They are convenient and in some cases essential for making purchases. However, I am totally against carrying a monthly balance of any amount. It is wasted money. If you can’t pay off your balance every month, I recommend two immediate steps.
1. Stop using your credit card and creating a bigger balance.
2. Make a plan to pay off your balance and get out of credit card debt as soon as possible.
There are a lot of good methods out there to help you pay off a credit card balance. The one that I prefer is to pay off your highest interest rate credit card balance first by making the largest possible payment you can afford to make on the principal of the loan. For instance, if you have a $5000 balance and your minimum payment is $125, pay your $125 and then add $125 to your payment toward lowering your balance. Increase your additional payment as you are able until you have a zero balance.
If you cannot pay it off each month, it is time to stop carrying a credit card.
Originally posted 4/14/2015.