I wanted to share with you the a neat video I found on the true cost of paying on only the minimum payments.
If you find yourself with a credit card payment it could be decades before you find yourself debt free again, Let’s say you have $10,000 in credit card debt. It represented by this cup filled with water. Now to completely get rid of the debt you need to return the water back to the credit card company or this pitcher.
So every month you pour out your water by making your minimum monthly payment of $142. (Pour water back into pitcher) It’s the average payment that people make. Now your total debt has gone down to $9,858. That’s a little bit, but not that much. Unfortanately there are outside influences that can raise that amount. That is called interest, which is around 17% so now your total debt is bsck to $9,999 at the end of the month. So after one month you have paid the credit card company $142 payment but your bill has only been lowered by $1.
The next month if you only pay the minimum payment your debt is down to $9,857, (Pour water back into pitcher.) But again there is interest. Since you pay 17% interest, you total debt is now $9,998.
After 10 years
9,896 still owed
After 25 years
$8422 still owed
After 35 years:
$1363 still owed
This is not counting late payments if you fail to pay on time.
Then after 36 years you will have finally paid off all your credit card debt making the minimum payment $142 with 17% interest every month.
You started off with a $10,000 debt, but in order to pay that off you have taken 3 ½ decades you have paid a total of $61,060 just for the privelage of not having to wait to save up. You have now paid off $10,000 of credit card debt.
Just imagine if you had an extra $61,000 you could have used for shopping, vacations, mortgage, retirement, children, grandchildren. Because even if you didn’t have children before you started there is a good chance you could have them after 36 years.
The part about this illustration is it’s more than a $61,000 loss over 35 years. If you add what would happen if you invest that same amount of money over the same time period you are looking at $252,000 plus the $61,000 so this $10,000 bill has actually cost over $310,000!!