Consumers have become more responsible in using credit cards over the last two years. Most of them are willing to bend over backwards to ensure their payments are made on time in order to prevent tarnishing their credit history. However, over 25% of the card holders still carry huge balances on their credit cards. According to one of the surveys conducted by the National Foundation for Credit Counseling in 2010, over eleven million people have credit card debts of over $10,000.
Huge credit card debts stay on for years. If the consumer pays off only the minimum required each month, then these dues continue to linger on for years on end. Michael Rubin, whose book “Beyond Paycheck to Paycheck” has gained a lot of popularity, says that a majority of the card holders do not realize the repercussions of taking a very long time to repay their credit card debts.
If a customer has over $2000 as dues on the card and continues to make just the minimum payments each month with an APR of 20.99%, then the time needed to repay the total due is almost 43 years. The interest paid off during this period will account to $9,797 which is over four times the total debt on the card.
The good news for card holders is that the CARD Act stipulates that banks should provide customers with a statement of how long it will take for them to clear their dues if they continue to make just the minimum payments. This will help increase the awareness among card holders and motivate them to clear off their dues at the earliest.