As counter-intuitive as it might seem, your credit card issuers might actually be able to help you pay off your debt faster. One of the tools you can use as you create a debt reduction plan is your credit card statement. Each month, your credit card issuer provides you with helpful insight into how you can pay off your credit card debt in three years. Here’s where to look.
The Credit CARD Act and Your Credit Card Statement
Back in 2009, Congress passed the Credit CARD Act. One of the provisions of this act is that credit card issuers are required to share information about your account, and how long it will take to pay it off. So, no, credit card issuers aren’t willingly offering you this information. In fact, it’s in their best interests if you keep making the minimum payment for years — or even decades.
As long as you can make the minimum payment, credit card issuers are happy. Of course, this means that you end up paying much more in the end, and that you are in debt for longer. One of the things the Credit CARD Act did was require credit card issuers to give you more information about your debt, and its cost. All you have to do is look at your credit card statement to see how much your debt will cost you, and to use the information to create a debt reduction plan.
Three-Year Debt Reduction Plan
While there are stories of people who can pay off their debt in a year or less, many of us have challenges that make it difficult to aggressively pay down debt. A debt siege is often a more realistic approach to paying down debt. Your credit card statement can help you make a three-year debt reduction plan, since that information is what is provided on your statement:
Your credit card statement includes a little box that tells you how much you will pay total (principal + interest) if you only pay the minimum, and you don’t add more charges to your account. It also tells you how long it will take you to finish paying off your debt. Then, the credit card issuer makes the comparison to how much you need to pay if you want to get rid of your debt within three years.
The above example is a line of credit used by an acquaintance of mine to consolidate his credit card debt. This line of credit has an interest rate of 11.99 percent. It’s not a super-low rate, but it’s better than the 19.99 to 22.99 percent APR that he was paying on his credit cards. After consolidating his debt, he can see exactly how much he needs to pay each month to be free of credit card debt in three years. (That is, of course, assuming that he doesn’t charge anymore debt.)
You can use your credit card statements in a similar way. Take a look at what you’ll pay if you stick with the minimum payments, and compare that to how much you can save by paying more each month. If you can’t afford to make those payments, you can consider consolidating your debt. Or, you can negotiate with your credit card issuers for lower rates so that your payments are lower.
Another tactic is to pay more than minimum, but less than the amount needed to be done in three years. You might extend your debt reduction plan out to five years or seven years, depending on your situation. But the credit card statement can offer you a starting point. If you haven’t really looked at your credit card statement recently, take the time to do so now. You’ll be glad you did.