Why is My $20 Bill Only Worth $5 Bucks?

Credit Card Management

by Leslie Sausage

Keep this in mind next time you're tempted to "put the pizza on plastic!"

=>The following information is based on an interest rate of 16.99% to 18.99%--

If your balance is $1000.00 and your minimum required payment is $20.00, 
then $15.00 of the payment goes to interest and only a small portion pays 
down the principal. If during the next month you charge $15.00 or $20.00 
on that card the same thing happens again.

=>Here's a common scenario for many credit card users...

With a $1000.00 balance on your card and $20.00 minimum payment due, $15.00 
will be for interest and only $5.00 will be for the principal to actually 
pay down the balance. Your new balance is $995.00.
Yep! You paid $20.00, but it was only worth $5.00

=>By only paying the minimum due, you'll not be able to get off this merry-go-round 
for years!!

You must work hard to get the balance down and here are just a few ideas:

=>Double the payment. This way your $40 will count for $25 on the principal 
rather than only $10 if done separately.

=>Avoid using the credit cards and thereby raising the balance.

=>Use cash for those little expenses that REALLY will multiply when charged 
to your credit card.

=>Pay the bill on time! One of my credit cards charges a $29.00 late fee. 
Yikes!

=>Watch that credit limit. Some cards charge a fee if you go over you credit 
limit--mine charges $29.00 for that privilege!

=>Learn to be more frugal!  Wait a little longer to buy new items, another 
week on the next haircut, bring your lunch from home, and so on.

Some reasons to avoid credit card debt.

=>It robs you of your time and money because of the effort needed to get 
it paid back.

=>It robs you of your peace of mind because it's nagging at you each month.

Sadly, it's much more fun charging it up than paying down the balance.
_____

Leslie Sausage is a wife, mother of 4 and the owner/editor of Frugal Homemaker 
http://frugalhomemaker.com which is online to encourage you with creative, 
practical and fun ideas for managing your resources.

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©2001 Leslie Sausage