Credit cards and the cost of making minimum payments

Man Paying Bills

As consumer credit card debt in Canada continues to rise, a TransUnion report found that the number of delinquencies remains relatively low. On the whole, Canadians are staying on top of their monthly payments but more often than not this means making only the required minimum payment.

Paying only the minimum may seem appealing; after all, you’re meeting your obligations while still having money for other expenses. It does, however, come at a price. Not only will it take a considerable amount of time to pay off your debt but the amount of interest you pay over time will be staggering.

Credit card balance  $5,000.00
Interest rate:  19.99%
Minimum payment:  3.00% of balance
Months to pay off debt:                  220
Total interest paid:  $5,854.39

In the above example it would take over 18 years to pay off your card while paying $5,854.39 in interest alone.  By comparison, committing to equal monthly payments of $150.00 would have your card paid off in 50 months. Interest paid during this time would be $2,357.06.

Figuring out the total amount of interest you’re paying over time may be just what you need to buckle down and pay off your card sooner. This could involve paying more than the required minimum, switching to a low-interest card or consolidating your debt with a personal loan which typically comes at a much lower interest rate.

Whatever you decide, there is no better time to start than right now.

Check out our PayOff Debt Calculator to see how much you can save on interest with a personal loan