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Paying Down Credit Card Debt

• Minimum Payments on Credit Cards
• Coping with Debt
• Settling Credit Card Debt

Credit card interest rates and minimum monthly payments affect how long it will take to pay off your debt and how much your purchase will cost you over time.

Real World Examples

Suppose when you’re 18, you charge $1,500 worth of clothes and electronics on a credit card with 19-percent APR interest.

If you repay only the minimum amount each month, and your minimum is 4 percent of the outstanding balance (the lowest amount permitted by some issuers), you’ll start with a $60 payment. You’ll be more than 26 years old by the time you pay off the debt. That’s 106 payments, and you will have paid more than $889 extra in interest. And that’s if you charge nothing else on the card, and no other fees are imposed (for example, late charges).

If your minimum payment is based on 2.5 percent of the outstanding balance, you’ll start with a $37.50 payment. You’ll be over 35 years old when you pay off the debt. That’s 208 payments, and you will have paid more than $2,138 in interest, even if you charge nothing else on the account and have no other fees.

Wondering how long it will take to pay off your debt? Based on the information you supply, this calculator estimates how long it will take you to pay off your credit card balance.

Keep Credit Card Use Under Control

Whether you shop online, by telephone, or by mail, a credit card can make buying things much easier. But when you use a credit card, it’s important to keep track of your spending. Incidental and impulse purchases add up. When the bill comes, you have to pay what you owe. Owing more than you can afford to repay can damage your credit rating. Keeping good records can prevent a lot of headaches, especially if there are inaccuracies on your monthly statement. If you notice a problem, report it immediately to the company that issued the card. Usually the instructions for disputing a charge are on your monthly statement. If you use your credit card to order online, by telephone, or by mail, keep copies and printouts with details about the transaction.

These details should include the company’s name, address, and telephone number; the date of your order; a copy of the order form you sent to the company or a list of the stock codes of the items you ordered; the order confirmation code; the ad or catalog from which you ordered (if applicable); any applicable warranties; and the return and refund policies.

Security Tips and More Information

If you use a credit card, charge card, or debit card, take the following precautions:

• Never lend it to anyone.
  
  
• Never sign a blank charge slip. Draw lines through blank spaces on charge slips above the total so the amount can’t be changed.
  
  
• Never put your account number on the outside of an envelope or on a postcard.
  
  
• Always be cautious about disclosing your account number on the telephone unless you know the person you’re dealing with represents a reputable company.
  
  
• Carry only the cards you expect to use to minimize the damage of a potential loss or theft.
  
  
• Always report lost or stolen credit cards, charge cards, and debit cards to card issuers as soon as possible. Follow up with letter that includes your account number, when you noticed the card missing, and when you first reported the loss.