Payoff Credit Cards 10x faster

Want to pay off those credit cards?!  I bet you do and I’ve got a great solution.  Let’s start with looking at some calculations.

Minimum Payment Calculation

Credit Card Balance	Minimum Payment	Interest Rate	Years To Payoff	Total Interest
$10,000	$250	18%	28.5	$14,423

A credit card balance of $10,000 will take about 28.5 years to pay off and will cost $14,423 in interest if you pay only the minimum payment.  That’s a long time to have credit cards and a lot of money in interest.  Yuck!  So, we definitely do not want to pay only the minimum payment.  Minimum payments are not good for anyone’s financial plan.

So, what to do?  I always recommend making a monthly fixed payment.  A fixed payment is to how you make your car payments or house payments — same payment amount every month.  Let’s see what happens if we do this with our credit card payment.

Fixed Credit Card Payment

Credit Card Balance	Fixed Payment	Interest Rate	Years To Payoff	Total Interest
$10,000	$250	18%	5.1	$5,386

I would start by using the minimum payment amount on your last statement.  So for our example, our minimum payment is $250.  By making a fixed payment of $250 every month, you will payoff $10,000 in 5.1 years and reduce your interest to $5,386.  You have saved $9,037 and paid off your credit card 23 years faster.  That is a great start but I think we can do even better.

Let’s add another $200 to the fixed payment and make our new fixed payment $450.  If you wondering how to get an extra $200 a month see my post on 11/7/18.

Extra $200

Credit Card Balance	Fixed Payment	Interest Rate	Years To Payoff	Total Interest
$10,000	$450	18%	2.3	$2,255

If we make a fixed payment of $450 per month, we will payoff the $10,000 in 2.3 years and pay $2,255 in interest.  That is 26 years faster with a savings of $12,168 in interest.  How exciting is that!!  You got this!  Get rid of that debt.

Note: This will only work if you don’t add additional expenses to your credit card.  A budget will help with that!