Sticking To A Minimum Credit Card Payment Schedule
Most US citizens are struggling to reduce bad debt. Bad debt - unsecured debt makes up the majority of Americans financial liabilities. Unsecured debt is what drains most Americans paychecks every week. This consists of debts that are still owed to your credit card company on your credit card balances, auto loans and any even some student loans, for example. Obviously, the object of being financially independent is to have as little bad debt as possible, this will help increase your wealth over time. While debts could be a result of bad finanacial control, there are sites like lovemoney.com that teaches people how to manage their money properly.Unsecured bad debt will work against you and most Americans seem content living paycheck to paycheck. We have conceded to the theory of "purchase now and pay for it later." Credit cards have lured many American consumers into this financial trap. Credit cards are so convenient and so easy to use that you just don`t realize the harm they bring at the time of purchase, only after the statements start rolling in do you realize what your purchase is actually going to cost you.
Credit Card Debt - New Sofa Example
Use this example, lets say you buy a new sofa from a local furniture shop for $1,600 and put it on your credit card. Your statement comes in the following month and you realize then that you can only make the minimum payment. This seems fine at the time but as other debts start adding up, you only meet the minimum payment for the next year or so. A year later, your kids are jumping up and down on the sofa and it breaks beyond repair! Now it is basically useless since it is broken and you realize you need a new one. The point is you are still paying for the old sofa and now you need to purchase a new sofa to replace the old one that is still on your credit card. Bottom line, use cash or go without!You might be wondering how long it takes to pay off a debt such as your sofa by making minimum payments? This is a close estimate but if you only pay the monthly minimum credit card payments, and your credit card has an average annual percentage interest rate of around 20 percent, it will take you over 22 years to pay off that $1,600 sofa. This is a perfect example of how bad debt will work against you. The more credit card debt you carry, the more time it will take to get yourself out of a trouble. Therefore, you need to minimize the amount of nonproductive debt build up on your credit card.