clearing the debt. Most people don’t work this out, and feel that the payments must simply be their fault for spending too much money to begin with.

 

This is a reason why the minimum payment amounts on many credit cards are ridiculously low.  It’s not for your benefit, it’s so that the balances can continue to escalate, month after weary month.

 

4.  One percent of difference.

 

One more thing. You might think there’s not that much difference between a card that charges 15% APR and one that charges 12% APR. Let’s see the difference the lower rate would make to that $1,000 borrowed for five years. Remember, after five years at 15%, you owed $2,011.35.

 

At 12%: $1120, $1254.40, $1404.93, $1573.52… $1762.34 after five years. So you’ve saved $249.01 from that 3% difference in APR – in other words, you’ve paid almost 25% less interest. 

 

Of course, the above examples are only a mathematical exercise.  First it assumes that you make no payments on the balance at all, which you most surely will (after all you are required to, right?), but it still is an interesting thing to keep in mind as you negotiate rates and decide what card to use. 

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