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welcome to DebtWave Credit Counseling Smart With Your Money Video Tips
today's video tip is part of a series called
credit card debt calculators
the dangers of paying minimum payments
it's in our human nature to want to pay less for things
we go out and we look for deals
we go online and look for specials we go to sales of fifty percent off or whatever
it might be
so why would it be any different when we're making credit card payments
after all
minimum payments are always much lower than the balance right
i mean if we only had to pay four hundred and fifty dollars out of a
twenty thousand dollar balance
why wouldn't we do that
well let's take a look at where the dangers are with this theory
we're also going to take a look at the time it takes to pay off the debt and
the total cost of paying back the balance
so using a credit card debt calculator
we will use the credit card numbers from our previous credit card videos in the
series
twenty thousand dollar balance with
a twenty percent interest rate
and a four hundred and fifty dollar payment which is two point five percent
of the balance
will be our minimum payment
now when we do the calculations you'll notice a few things
first the breakdown of the monthly payments
the first month payment four hundred and fifty dollars is broken down
by the finance charge and the principal paid
at twenty percent three hundred and thirty three dollars goes towards your
finance charge
right into the pockets of the credit card company
and only one hundred and sixteen goes towards the principle
your balance
second notice every monthly payment after that
this shows that you are paying two point five percent as we said before
meaning your payment actually goes down every month but here's the kicker
so does the finance in principal payments
making it almost impossible to make any headway towards paying it off
and finally look at the bottom line
it would take around fifty one years had total of seventy five thousand dollars
to pay off the ballots
imagine that
that's almost triple the original twenty thousand dollar ballots fifty five
thousand dollars in interest payments
and that's if you've never used the card again
to see how long and how much you would pay each month when paying the minimum
payment
visit DebtWave's debt calculators on our webpage
at Debtwave.com
and go to the calculator at tab at the top of the home page and just type in your
numbers
thank you for tuning into the Smart With Your Money Video Tips
be sure to look for our next video in this series credit card debt calculators
the benefits of fixed credit card payments
if you have any questions or a topic you would like answered please email your
questions to us at education@debtwave.com or
leave a comment on facebook.com/debtwave
you can also follow us on twitter or you can reach is at eight eighty eight
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