Ignore the Minimum Payment To Pay Down Debt

Creditors have been playing a dirty trick on their customers. And the worst part is, they're making it look like they're actually doing us a favor.

Just grab your latest credit card bill to see what I'm talking about. What's the most prominent feature on your bill? I bet it's not your balance, but your minimum payment. This "amount due" is usually between 2 and 4 percent of the full amount you owe. At first glance, this looks like a good thing. Let's say you're dreaming of buying yourself a $500 laptop for Christmas. Five hundred bucks seems like a lot to spare in this economy; but, at a 2 percent minimum payment, you'd only be shelling out $10 a month if you used your credit card - seemingly making the purchase more affordable.

That's the illusion. What's the reality? You might be paying less with each payment but you'll pay more in the long run. Creditors created minimum payments not to save you money, but to keep you in debt - and shelling out your hard-earned dollars - infinitely.

Since 2 percent barely covers the daily interest you'd being charged with an average APR, your payments would do little to nothing to reduce your principal balance, the actual amount you charge when you buy your laptop. At that rate, you could be paying for your computer for decades, and ultimately you'd far exceed the original price.

Fortunately, all you have to do to outsmart your credit card company is exceed the minimum payment. The more you hand over beyond the minimum each month, the more of your actual principal you'll reduce. Less principal means less interest will be levied, which in turn means smaller bills for fewer years.

It's hard to ask folks to pay more money than they have to in times like these. But in this case, a little suffering today can prevent a lot of suffering tomorrow. However, if you simply can't spare another dime - regardless of future savings -- don't despair. Bankruptcy can help lower (and in some cases, eliminate) debt by providing a manageable payment plan. Learn more for free when you try a complimentary one-on-one debt analysis with an Atlanta bankruptcy attorney. Minimum payments minimize your money - we can help you maximize it.

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