With credit cards many people have fallen into the trap of paying only the minimum payment. It is so easy to just pay the smallest amount possible and ignore it for another month.
But starting on February 22, when the CARD act is completely implemented consumers will know exactly what they are doing when they pay only the minimum payment. Exactly as how much of the principal they have paid and exactly how long it will take to pay it off if only the minimum payment is made. For a majority of consumers this information is long overdue.
To give an example of just exactly how detrimental it is to pay only the minimum payment, consider this scenario. With a credit card balance of just $1000.00 at 17% annual percentage rate, if you were to make only the required minimum monthly payment, it would take just over 17 YEARS to pay off the balance of $1000.00. Not only that the total amount including principal and interest you would have paid is more than triple the original balance. To amount to pay off $1000.00 at 17% interest with a minimum payment of $15.00 turns out to be an astounding $3082.00 (not to mention 17 years!).
At 17 years and three times as much money as you originally borrowed, perhaps you should think twice about only making the minimum payment.
If you add in just a small amount more, such as $5.00 more, thereby making a payment of $20.00 a month, the time to payoff would drop dramatically and it would only take 7 years and 4 months to pay off the balance and you would end up paying a much more reasonable $1750.00 for the privilege of borrowing the original $1000.00.
After February 22, 2010 your credit card statement will reflect this valuable information. You will be informed about how long it will take and how much you will pay if you choose to pay only the minimum payment. It will also tell you exactly how much you need to pay and how much you will end up paying in order to pay off the card in the more reasonable amount of time of 3 years or 36 months.