THE CREDIT CARD TRIP

Sanderson M. Smith

THE CREDIT CARD TRIP

This is simply an illustration of what can happen when you attempt to pay off credit card debts by small payments each month. Suppose you have $10,000 on your card, the annual rate is 18% (or 1.5% a month), and you make monthly payments of $200. Here's a two year schedule:

Month	Payment ($)	Interest Owed ($)	Principle Repaid	Principle Outstanding
0	0			10,000.00
1	200	0.00	200.00	9,800.00
2	200	147.00	53.00	9,747.00
3	200	146.21	53.80	9,693.21
4	200	145.40	54.60	9,638.60
5	200	144.28	55.42	9,583.18
6	200	143.75	56.25	9,526.93
7	200	142.90	57.10	9,469.83
8	200	142.05	57.95	9,411.88
9	200	141.18	58.82	9,353.06
10	200	140.30	59.70	9,293.36
11	200	139.40	60.60	9,232.76
12	200	138.49	61.51	9,171.25
13	200	137.57	62.43	9,108.82
14	200	136.63	63.37	9,045.45
15	200	135.68	64.32	8,981.13
16	200	134.72	65.28	8,915.85
17	200	133.74	66.26	8,849.58
18	200	132.74	67.26	8,782.33
19	200	131.73	68.27	8,714.06
20	200	130.71	69.29	8,644.77
21	200	129.67	70.33	8,574.45
22	200	128.62	71.38	8,503.06
23	200	127.55	72.45	8,430.61
24	200	126.46	73.54	8,357.07

TOTALS	4,800	3,157.07	1,642.93

After two years, you have paid a total of $4,800 in payments, you still owe $8,357.07, and you have paid $3,157.07 in interest (which is 31.57% of the amount you originally owed... and you aren't done yet!)

If you continue this table for two more years, you will find that at the end of four years,

$9,600.00 = your total payments.

$5,819.75 = interest you have paid (58% of what you originally charged).

$3,780.25 = amount of principle you have paid.

$6,219.75 = what you still owe (you haven't even paid off half of what you charged).

YIKE!

Moral of story: Use credit cards wisely.

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