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Reduce Your Credit Card Debt

Dollars and Cents

One of the best New Year resolutions that you can make is to reduce your credit card debt. It is not unusual to have to pay 21% interest when you carry a balance on a credit card. In addition, you can be penalized with late fees and lower credit scores if you do not pay by the date your payment is due.

Although credit is convenient when you do not have the money, it places a great burden on your future finances. Suppose that you bought some new furniture for $1000.00 on a credit card. The lender usually will ask you to pay only 5% of the total amount per month, which is around $51.39 Dollars per month. It will take 24 months to pay off the loan at 21% annual interest. At the end of the two years, you will have paid $1,233.26 Dollars, including $233.26 in interest.

You can reduce the interest that you pay and accelerate your payment schedule by increasing your monthly payment. For example, if instead of paying $51.39, you pay $70 Dollars per month ($18.61 Dollars extra), you will pay off the loan in 17 months instead of 24, and you will save $72.34 Dollars in interest.

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