Minimum Monthly Payments – the creditors' dream
Nothing makes creditors happier than customers who continue making minimum payments month after month. In fact, most of their profits come from people trapped in the cycle of endless minimum payments.
When it comes to the mathematics of credit card debt, the deck is stacked against you right from the beginning unless you pay your balances in full every month. If you're finding it hard to pay the minimums, you may already be in trouble. And if you've borrowed from one card to make payments on another, that's a recipe for financial disaster.
The danger of minimum payments
A household budget that's stretched to the limit leaves no room for the unexpected. One little bump in the road and you can't make your minimum payments.
Once you start missing payments on your credit card obligations, those 9.9% interest rates that seemed so attractive suddenly jump to 25%, 29%, even 32%. As if that wasn't bad enough, the banks start tacking on penalties in the form of late fees and over-limit charges at $35 or more per incident.
So all of a sudden, a debt you were previously able to keep up with becomes a monster that starts growing like a financial cancer.
It really doesn't matter if you've been a loyal customer and made your payments on time for 5, 10, even 20 years.
Once you start falling behind, you'll learn that the banks are not sympathetic when their customers are down. They are in business to make profits for their shareholders, and most of those profits come from people trapped in the cycle of endless minimum payments.
While continuing to make minimum payments may seem like the best thing to do, it is an expensive and risk-filled strategy.
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