Can I sell you a $27 happy meal from McDonalds? Not interested? How about a Big Mac for $47? Sounds crazy right? You would call anyone who did that insane… Hold your judgment for a minute because this might hit close to home. If you buy things on a credit card and only make the minimum payment then you are doing the EXACT same thing. It’s almost commonplace for Americans to be in this situation.
Let’s walk through the math, assuming the following:
- Amount owed on a credit card is $3,100.
- The card company charges an interest rate of 19.9%.
- Cardholder only pays the minimum monthly payment of $51.43.
Question 1: How long will it take to pay off the card?
Answer: 39.4 years!
Question 2: How much principal will be paid on this debt in the first year?
Answer: 29 cents!
Question 3: How much interest will be required to pay the card off?
The $21,216 is just the interest alone! When you add the principal of $3,100 to that interest expense, you end up paying 7.84 times the original amount borrowed. So if you put a $5.99 Big Mac meal on your credit card and just pay the minimum you are paying almost 8 times what the Big Mac actually cost.
Keep reading because we have a simple strategy that will not only help you avoid overpaying for things on credit but we can show you how to easily get completely out of debt in less than 10 years. Ready to go? Get our real life example of a couple that did exactly this.
This might sound extreme. It definitely is! You might be saying to yourself, “well I make a little more than the minimum payment.” In that case, congratulations — you might be doing a little better than those only paying the minimum. But you still are getting raked over the coals. Remember…
Those who understand interest earn it, those who don’t pay it.
Tip: If you do have to put something on a credit card, especially something as insignificant as a hamburger, pay off the credit card as quickly as you can. Don’t let big balances pile up on items such as food. Is food really something you should be borrowing money to purchase anyway? And what about bigger-ticket items such as a TV? You may feel justified in borrowing for something more expensive like electronics, for instance. But ask yourself the question, “would I rather take a little time and save $400 for that new TV or is having it right now worth $4,800 to me?”
Getting out of debt sometimes sounds hard. It definitely can be if you don’t have a plan or have someone who can help you along the way
We would love to help you by first sharing a simple example of some of our clients (Mark & Joyce) that were not only able to stop buying things on credit BUT got completely out of debt in less than 10 years. They’ve given us permission to share the details of their financial life with you because it changed their life and they wanted others to feel the sense of relief that they now feel. If you are ready to do the same then, as a gift from them, please download their story. We guarantee that if you read it, you will quickly see how our strategy can do the same for you. It’s free and worth the read… we promise. If you then have more questions, we will be here for you!