When financial troubles hit, reducing credit card payments is often the first plan of attack to get back on track. Unfortunately, many people in Florida and elsewhere seem unaware that paying the minimum balance is essentially useless. In some circumstances, bankruptcy can be a smarter and economically sensible way to discharge credit card debt rather than treading water by making minimum payments.
According to new numbers, very few people actually realized just how pointless paying the minimum balance is in a few situations. For example, people were asked about the effectiveness of paying off a $2,000 credit card bill by means of only paying the minimum balance. The minimum payment would be $10 a month. When calculated correctly, it would take over 30 years to successfully pay off that credit card.
Not only were people unaware of the length of time to pay off a credit card, they seemed unaware of the impact on a FICO credit score. Not having a credit card balance can cause more credit score harm than good. Concurrently, having too many cards and being close to the limit can be damaging to a credit score also. The perfect balance may be having credit and using a small percentage of that credit.
Credit card debt can be complicated and have a ripple effect on all aspects of a person’s financial future. Bankruptcy can lead to a discharge of credit card obligations and save a person thousands of dollars in minimum payments that otherwise make a very small dent in the overall weight of that debt. Those in Florida who are struggling with an unmanageable amount of credit card debt may gain by considering the effectiveness of a bankruptcy discharge as compared to simply remitting the minimum balance payable each month.
Source: nypost.com, “It can take longer to pay off a $2,000 credit card debt than to raise a child“, Quentin Fottrell, July 8, 2015