Paying Off High-Rate Credit Cards Pays Off

It's not unusual for borrowers to take 20 to 30 years to pay off a mortgage, but imagine making payments that long to pay off a big-screen TV or summer vacation. The television may not last as long as the payments; the tan's gone in a matter of weeks.

Yet long-term credit card bills are reality for cardholders paying only the minimum payment, typically 3% or 4%, on hefty bills.

While a credit card offers you a slew of benefits, don't pay more--or longer--for convenience than you have to.

The fact is, if you're like most credit union member cardholders you do carry a balance from month to month.

Say you have the typical average credit card balance of those members carrying a balance from month to month ($3,000), and figure monthly payments at 3% of the balance with a $25 minimum monthly payment, and without adding any other purchases. It'll take you 11 years to pay off the balance and you'll pay $2,495 in interest charges if you choose a high-rate (18%) bank credit card over a HUECU credit card.

If you make $100 monthly payments, it'll take you nearly three and one-half years to pay off the $3,000 balance and you'll pay $1,016 in interest charges.

If you make a $257 monthly payment--the average monthly payment of credit union members carrying a balance--you'll make those payments for a little more than one year before paying off the $3,000 balance and it'll cost you $323 in interest charges.

Choosing a lower-rate card, say at 14%, makes a noticeable difference. For the person making minimum monthly payments, as in the first example, the lower rate cuts about one and one-half years off your pay-off time and almost $900 off your interest charges.

So take advantage of all that credit cards have to offer, but don't let issuers with high-rate cards take advantage of you. Want more info? Take advantage of our Healthy Credit Learning Center and map out your payments with our credit card payoff calculator. You can also stop by any of our branch locations, email us or call us at (617) 495-4460.

 

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