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  • The average American household owes $8,000 to credit card companies, according to MSN Money. This figure can be incredibly daunting, especially if you are only able to make the minimum payment each month. If your ultimate goal is to reduce and eventually eliminate your credit card debt, you are going to have to make a higher monthly payment than just the measly minimum amount listed on your statement.

    Reducing Your Debt

    According to Curtis Arnold, the founder of CardRatings.com and a former credit card debtee, the minimum payment on most cards is just one percent of the principle balance, plus the interest and fees that have accrued over the course of a month. That piddly one percent will never make a real dent in your principle balance. But paying the interest plus five percent or six percent of the principle balance will make a difference that you can actually see every month on your statement. Credit card payment calculators offer a dose of reality for people who do not want to spend 10 years paying off their credit card debt. Go to your computer and type "credit card payment calculator" into the search bar of your favorite search engine. Click on the most relevant option and you should come to a screen that asks for your current balance, the interest rate on your credit card, the percent of your balance paid in the minimum payment and the dollar amount of your minimum payment. Enter all of these figures and then click on "Calculate." The resulting number of months or years might be shocking. Now that you know why you should not pay only the minimum amount, you have to determine how much extra you should pay each month. This depends on a few factors. The first is how much extra money you have in your budget. If you are putting $1,000 in savings at the end of the month but only paying the minimum amount on your credit card, consider taking $100 or $200 of that $1,000 and putting it toward the credit card payment to make a bigger dent in your debt load. However, if your budget is already tight, you may need to cut out a few extras in order to find extra money to put toward your credit card. Getting rid of cable, kicking a smoking habit or eating more meals at home are all examples of ways you can free up some money for the credit card payment. The second factor is how soon you would like to pay off your card. In this case, a different Internet calculator can help you to adjust your monthly payment to achieve your goal. Type "how long to pay off credit card debt" into the search engine. Click on the most relevant result. The screen will ask for your current balance, the interest rate on the card and how many months you would like to be making payments. Then click on "Calculate" to determine how much you will need to pay each month to eventually be debt-free.

    Source:

    MSN Money: The Basics - How does your debt compare?

    FiLife.com: Why Paying Higher Credit Card Minimum Payments is in Your Best Interest

    CreditCards.com Calculator: The true cost of paying the minimum

    Resource:

    BankRate.com Calculator: What will it take to pay off my credit card?

    Penn State College of Agricultural Sciences: Cutting Credit Costs - Pay More Than the Minimum

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