Scary Calculation On Credit Card Debt Elimination

Eliminating your credit card debt is no easy task. Especially when you have accumulated tons of credit card debt and you are only making the minimum monthly payment on your balance.

Today I wanted to try something different and share some food for thought on a Friday.

We all know that credit cards can be the kiss of death in your 20s or as a college student. We all also know that making the minimum payment on your credit card is not a great idea. Before any of you jump at me and say that debt is more psychological than math- hold that thought for a moment.

Exactly how bad is it to make the minimum payment on your credit card? Really bad. How long will it take to reduce your credit card debt while paying the minimum payment? Really long.

While trying to stay awake in my Thursday evening Corporate Finance class I decided to play around with some numbers. I was running the basic credit card and debt calculations but then I decided try something different. I wanted to test out how long it would take to pay off credit card debt. This naturally led to me examining how long it would take to pay off your credit card balance when making only the monthly minimum payment.

Find the time needed to pay off your credit card balance:


Credit card balance= $1000

APR= 18%

Minimum monthly payment on balance= $20

*No more credit card debt is accumulated*

Put these numbers into your financial calculator and the result is 7.76 years!

Yes if you decide to put $1,000 on your credit card due to a vacation or shopping spree and decide to make the minimum payments, you will be in for a long ride. It will take you over 7 years to pay off your credit card balance.

Let’s return to the argument that debt is more psychological than math (will save full discussion for another day). Think about this:

Is it worth spending that $1000 on your credit card for that vacation if you know it will take over 7 years to pay off?

Is that new leather jacket worth paying off long after it will be out of style?

How much better could you sleep at night if you knew you worked & paid for all of your nice stuff?

Credit card balance reduction is a long and tedious process. As you go shopping this weekend please try to keep this post in mind. If you are consciously spending your money while shopping then go ahead and indulge. If you are going to make the minimum payment on your credit card balance then please stay here for a minute. You can always dig through the College Life 101 category to find some cool ideas for this weekend that are down to Earth and involve cheap partying!

photo: mariannerichmond

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