According to the Credit Card Smarts Calculator from Advantage Publications, a $1,000 debt on a credit card that has an 18% annual percentage rate (APR) repaid by making 4% minimum monthly payments will take 6 years to pay off and cost $1,465, including $465 in interest. This assumes that no additional charges are made. If you can pay 6% of the outstanding balance ($60 per month), you will cut the repayment time by two years and save $399 in interest.
The take-home message is that even small increases in monthly debt repayment can result in significant time and interest savings. Most creditors today require a minimum payment of at least 3% of the outstanding balance but you can save significant sums by ramping that percentage up even a little bit. Of course, the ideal strategy is to pay your credit card bills in full each month and not charge any more than you can afford to quickly repay.
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