Get Out Of Credit Card Debt - Let's Run Some Numbers to See How Long It Will Take to Pay Off Your Debt

How long would it take to pay off your credit card debt if you faithfully paid the minimum amount due? What are the advantages if you increased your credit card payments? One benefit is that you would pay a lot less in interest. Another is that you would pay off your credit card in a shorter time frame. Here's the scenario...

Let's take your $2,000 vacation to the Bahamas that you charged to a card with an 18% interest rate. If you make minimum payments of $40 and never use the credit card again, it will take you more than 7 years and 10 months to pay off -- and you will end up paying $1,725 in interest.

Here's another way of looking at it. By making minimum payments of $40, your $2,000 vacation turns into a $3,725 expense (vacation + interest). If you paid cash for your trip, you could have saved almost as much as it was worth. A savings of $1,725.

Say you make payments of $80 instead of $40. You could pay off your debt in 2 years and 8 months. That's almost 5 years less if you double your credit card payment. The total interest paid on $2,000 with a monthly payment of $80 is $526 instead of $1,725. That is a savings of $1,199.

If you are motivated to pay off your $2,000 credit card debt in 1 year, you would have to make 12 monthly payments of $183. In this scenario, the total interest paid is $200.

So how do you get to the point of paying more on your balance? One way is to call your card companies and explain that you intend to transfer your balance to another company unless your rate is lowered. If your credit score is above 750, you should be able to get a rate under 10%. Even if your credit score is about 650, you should be eligible for a lower rate .

Lowering your interest rate from 18% to 15% on a $2,000 credit card debt will save you $567. Instead of paying $1,725, you would pay $1,158. And instead of taking 7 years and 10 months to pay off your credit card, it would take 6 years and 7 months.

Another suggestion is to pay Uncle Sam less. By adjusting your tax withholdings, you can keep money in your own pocket and put a couple hundred dollars a month toward your debt.

Running numbers on your debt puts your financial obligations into perspective.