Minimum payments are calculated to keep you in eternal debt. The usual calculation is 90% interest and only 10% toward the principal balance. They mean to keep you in bondage forever if possible. The average interest rate, even considering the low-end rates they lead with, is still 18.9 %, not including other fees like the $29 average late fee. Let's look at an example.
If your credit card balance is $8,000 and you make the minimum payment at 18% interest, it will take 25 years and 7 months to pay off the balance. That assumes you make no further charges on the card. You will pay $15,432 dollars in interest alone and the total of your payments will be $23,432, nearly three times the amount you originally charged. Congratulations! In order to get it now, you have reduced your standard of living to one third of what it could have been. Keep that up, and the American dream becomes a nightmare.
Recently, at the urging of the Federal Reserve, many credit card providers shortened the length of time it takes to repay by as much as doubling the minimum payments. Ouch! But that is actually a good thing. Still, isn't 10 to 15 years way too long to be paying on last summers vacation? - Paul
