Minimum payments may seem like a painless way to have it now and pay for it later. But let’s look at the facts. Let’s say you charge $3000 on your credit card, and never use it again. The card has a 19.8% annual percentage rate. You choose to only pay the minimum payment each month (which is usually about 2% of the balance). HOW MUCH WILL YOU EVENTUALLY PAY IN INTEREST? AND HOW LONG WILL IT TAKE YOU TO PAY IT OFF?
YIKES!
Yes, it’s sad but true. You were able to use the bank’s money to spend beyond your ability, but the cost of that is steep. If you only pay the minimum payment each month, you will pay a total of $3287 in INTEREST. This is MORE than the original amount borrowed. And it will take 15 years to pay it off. You pay the MAXIMUM interest when you pay the MINIMUM payment.
"Banks will take a risk on young people the way they never would have a decade ago, because they've discovered that students have become their best customers because they tend to make the minimum payments."
Nina Prikazsky, Nellie Mae's vice president of operations
