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The Real Cost of “Minimum-Only” Payments
If you make the minimum monthly payment on a $2,000 credit card balance with an annual percentage rate of 18.9%, it’ll take you 22 years to pay it off, and the total cost will have been $4,688. Make large payments whenever possible and shorten the amount of time you’re in debt. Here’s another example.
| $5,000 |
2% |
279 months (23 years) |
$3,980 |
| $5,000 |
5% |
100 months (8 years) |
$1,099 |
An even better strategy would be to make a payment in the same amount each month, regardless of the balance, until the entire debt is repaid.
| $5,000 |
$125 |
51 months (4.25 years) |
$1,257 |
| $5,000 |
$250 |
23 months (less than 2 years) |
$549 |
Source: Bankrate.com |
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