Credit card debt is one of the most prevalent forms of debt in American society. According to a 2017 report from USA Today, the average American holds approximately $5,551 in credit card debt. With some interest rates as high as 20 percent, some people find themselves in a hole they cannot get out of.
One reason so many people take out credit cards is due to the fact they come with attractive monthly payments. In some instances, the credit card company may only require you to pay as little as $50 a month. If you make that minimum payment every month combined with the interest rate, you may find your debt barely gets any lower as time goes on. Here are the reasons you should always pay more than the minimum:
Pay off the debt faster
If you have $5,000 in credit card debt with a $100 minimum balance, then it will take years for you to pay off the debt. Over those years, interest rates can add thousands of dollars to the amount you have to pay. If you increase how much you pay every month to $200, then you will get out of debt sooner. You will also save yourself a ton of money in interest rates.
Spend less money
Spending more money now may make a slight dent in your wallet, but it is better than paying off a ton of money due to interest rates. The credit card company adds the interest rate based on the balance every month. By paying more, the total balance is slightly lower than what it would be ordinarily. This means less money is added from interest.
There are various ways you can have greater success in making bigger payments. Instead of paying only once a month, you should consider paying twice. This is great if your paycheck comes twice monthly because you can put a set amount toward your credit card debt with each paycheck. Another tip is to not make any more purchases with your credit card until it is clear. Acquire a debit card for the time being.