Credit card debt termination can sometimes seem like an insurmountable mountain that stands between you and your financial goals. And climbing over that mountain (or digging through it for that matter) can seem like a massive undertaking.
But dealing with credit card debt is no different than dealing with any other seemingly large problem (or opportunity). You must first get the "big picture" view in focus, figure out what you want to achieve, and then break it down into small "doable" steps. It's like that old saying...
"How do you eat an elephant?..."
"One bite at a time!
And although many unscrupulous people (people that likely want more of your money) would like you to believe that credit card debt termination can be quick and painless, that is just not the case. The reality is that it is a process, not an event.
But don't worry, it's not all doom and gloom. There is some good news as you will see below, and a little trick that you can use to speed up this payback process exponentially.
If you are only paying the minimum balance on your credit card statements each month and you expect to get out of debt in your lifetime, you better have a seat for what you are about to read next.
Sidebar: The example I will be sharing below, and the subsequent "trick" assumes that you are at least able to make the minimum payments on your debts right now, and can continue to do so going forward. If you can't, or if you feel that you would benefit from a free debt counseling session with a senior debt counselor, there is a company that I recommend that will review your situation, work on developing a plan for you, and, if appropriate they will recommend a third party service to help you solve your debt problems. They themselves do not provide debt relief services (only free debt counseling) and therefore you can be assured that they will only recommend a service(s) that will be appropriate for you. You can sign up for a free debt counseling session from them here.
Alright, are you sitting down? Good.
In my introduction to debt consolidation article I used an example of a person with $20,000 in credit card debt, an interest rate of 22% and a minimum payment amount equal to 2% of the outstanding balance each month. I went on to say that if, given this scenario, the card holder only made the minimum payment each month as required by the credit card company, it would take approximately 161 years and over $210,000 in interest charges before the debt was paid off.
Scary stuff! (I told you to sit down, remember?!)
Alright, before we get to the good news, here's a little explanation about how credit card minimum payments work.
Back to the example above... in the very first month the minimum payment amount on the credit card statement would be $400 ($20,000 X 2% = $400). Some of that $400 goes towards paying down the principal of the debt (the $20,000) while the rest goes towards interest charges. As you can probably guess, the lion's share goes towards interest, but some (about $33 in this instance) goes towards paying down the principal, leaving $19,967 still owing.
When the next month's statement arrives the minimum payment amount will be $399.34 ($19,967 X 2% = $399.34) or slightly lower than the previous month. And each subsequent month the minimum payment will drop slightly until, 161 years and $210,000 in interest fees later, it hits $0.
Alright, that's our quick minimum payment lesson. Now let's get to the credit card debt termination "trick".
The trick is this...
Instead of paying $399.34 in the second month of our example (and less and less as the months roll on), if you were to continue paying $400 every month you would have your credit cards paid off 150 years earlier and save yourself $176,000 in interest charges.
Yes, you should read that again because it is very, very important to understand. By simply maintaining your monthly payment at $400, instead of lowering it each month as your credit card company encourages, you will pay off your debts 93% faster and save yourself almost 84% in interest charges.
Not a bad little credit card debt termination trick if I do say so myself.
As I mentioned above, one of the keys to solving a big problem is to break it down into "doable" steps. And that is exactly what this "trick" does. Only a small change to your payment habits (heck, only pennies on the dollar for the first little while) can make a huge difference to how long it takes to pay off that credit card debt.
Now imagine what would happen if you upped that $400 per month to say $450 per month. Well, I'll tell you. You would save another 3 years and another $13,000 in interest charges.
The lesson here: Small changes to your payment habits over the long run can have a huge impact on credit card debt termination.
If you are still looking for a way out of debt and are just not sure what you options are, have a look at my introductory article on getting out of debt. It's a great way to learn about the different credit card debt relief programs and techniques that are available, what might work for you, and what scams to avoid. If, after you have determined what your options are, you are still confused or need help deciding on which solution suits your situation best, a free debt counseling session can be a wise next move.