{"id":2423,"date":"2021-09-15T18:00:25","date_gmt":"2021-09-15T18:00:25","guid":{"rendered":"https:\/\/www.beyondfinance.com\/blog\/?p=2423"},"modified":"2023-12-12T17:43:38","modified_gmt":"2023-12-12T17:43:38","slug":"credit-card-minimum-payments-real-cost","status":"publish","type":"post","link":"https:\/\/www.beyondfinance.com\/blog\/credit-card-minimum-payments-real-cost\/","title":{"rendered":"The Real Cost of Paying Only Minimum Payments on Credit Cards"},"content":{"rendered":"\n

Without providing an actual number, many of our clients have one thing in common when they come to Beyond Finance \u2013 they\u2019re only making minimum payments on their credit cards<\/strong>. It\u2019s not a source of blame or accusation, just a fact in the debt journey<\/a> where they find themselves.<\/p>\n\n\n\n

It\u2019s what they can do<\/a><\/strong>. People burdened by debt want to do the right thing and pay what they owe. The one enormous problem is they are unable to do so. There is only so much money in a bank account, and what\u2019s a responsible person to do? Pay $30 on a $5,000 credit card or get groceries for the children? If you have ever been in that person\u2019s situation, you\u2019d understand why that\u2019s not such an easy decision.<\/p>\n\n\n\n

The problem with that scenario is that while it may save a few dollars in the short term, it\u2019s not a long-term solution<\/a>. Also, that approach of only a minimum payments schedule can cause late fees to accrue, which can be atrocious, but no one can keep that up forever.<\/p>\n\n\n\n

How Much Minimum Payments Cost?<\/h2>\n\n\n\n
\"People
Source: Getty Images<\/figcaption><\/figure>\n\n\n\n

The average credit card debt of U.S. families<\/a> is $6,270<\/strong>. The interest rate averages out to 16.61%, although some cards carry an annual percentage rate (APR) of 21.21%.<\/p>\n\n\n\n

You work hard, so you think paying $100 each month on that $5,000 will keep you out of trouble. The problem with that thinking is the finance charges total out at $7,282.74 over 48 months. And if no added charges are made and you maintain the $100 payment, you will pay $12,282.74 <\/strong>to crawl out from under that one card.<\/p>\n\n\n\n

How\u2019s paying off that \u201ccash car\u201d for your graduating high schooler for the next 10 years sound? Not good. Admit it: If that car had a sticker price of $12,282.74, you may not have ever bought it. You were looking for a $5,000 car, but you charged it because you didn\u2019t have that amount in savings. And so, next stop? Minimum payments.<\/p>\n\n\n\n

You\u2019re not alone. Consumers can find themselves in a downward spiral of debt, especially when they have multiple cards using that same strategy. Yet, the result may be the same \u2013 pay twice as much or more for purchases with interest, APR and random late fees.<\/p>\n\n\n\n

Learning What Else You Pay<\/h2>\n\n\n\n
\"Acute
Source: Getty Images<\/figcaption><\/figure>\n\n\n\n

Have you been going about your day when tragedy strikes unexpectedly? The car broke down, a medical issue that insurance didn\u2019t entirely cover, or the boss called and had to relieve you from your job. Even worse, you could have been hit with one of those harrowing situations one after the other. Countless people have experienced this in life, and few have walked unscathed by the debt caused in its wake.<\/p>\n\n\n\n

Life happens. And when it does, it is impolite and unforgiving. Because of life\u2019s unexpected turns for the worse, debt is usually a result. If you have statements that you can only pay the minimum month-over-month, that may be signs of a more significant issue.<\/p>\n\n\n\n