How to avoid Credit Card Debt?People fall in credit card debt due to minimum Amount Due. Realize that the "minimum amount due" -- the lowest amount you need to pay so you will not be considered a delinquent borrower -- is an attractive debt trap that can siphon your money away. Paying only the minimum will create a black hole that will swallow a huge chunk of your income -- given the powerful gravity of compounding interest.
Danger of Minimum Due AmoutA hypothetical 30,000$ balance on a credit card that charges 3.25 percent interest per month will take you 76 months, or six years and three months, to pay the debt off. That is assuming you don't use your credit card during that period, and assuming that you will pay the last bill that would amount to 619.50 $. At the end of the period, you would have paid 19,438.57 $ in interest alone.How to handle credit card debt ?A better way to retire debt is to set aside a bigger but manageable amount for your credit card bill payment every month. By paying 2,500 $ a month, for example, you will wipe out the 30,000-$ debt in one year.Using this strategy, the interest will amount to 6,337.50 $ -- still a big amount if compared with what world standard rates would translate to, but much smaller than 19,438.57 $ in interest if you pay only the minimum. Look at your budget and make your credit card payments one of your priorities. Credit card holders who cannot do this should cut up their credit cards, because the sad truth is so many cardholders do not have the discipline needed to enjoy the benefits of a credit card.
Your monthly commitment shouldn't force you to eat dried fish every day for the next five years. It should be comfortable but high enough to help you retire your debt as soon as possible. Always eliminate credit card debt as top priority.
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