Use this calculator to help wipe out your credit card debt

If you’re carrying credit card balances and have joined the growing ranks of consumers who are resolved to wipe out that debt, the Federal Reserve offers a useful tool that can motivate you to translate your good intentions into action.  The Fed's free credit card calculator that shows how long it would take you to pay off your card debt at its current interest rate if you made only the minimum monthly payment, along with the grand total of how much you’d pay in finance charges over that time. 

Let’s say you were carrying a $6,000 balance, which is roughly the average total credit card debt an individual cardholder carries on bank-issued cards.   Let’s assume further that you were paying 17.9% interest, which is the increased rate that Capital One recently imposed on many of its cardholders.   The Federal Reserve calculator reveals that if you made only minimum monthly payments of $120, it would take 37 years to pay off that balance and cost you $15,523 in interest charges over that time.

The calculator also shows the impact of various plans for paying off that debt sooner.  If you select five years as your deadline for paying it off, you’d need to make monthly payments of $153 a month and the total interest you’d pay would drop to $3,123.   If you aimed to get rid of the debt in just two years, your monthly payment would be $300 a month and your total interest tab would come to $1,183.

Even if you’re paying the average variable credit card rate in the U.S., which is currently 11.04 percent, according to Bankrate.com, making only the minimum monthly payment still will keep you in hock for a long time. It would take 19 years to wipe out that $6,000 balance if you were paying a monthly minimum of $120 cost you $4,605 in finance charges at that interest rate.

To develop a credit card debt repayment plan that gives you the most bang for your buck in wiping out balances and minimizing interest charges, gather copies of your most recent card statements to make a master list of current balances and finance charges for each card. Then put that Fed’s calculator to work to devise a strategy that devotes as much money as possible to wiping out high-interest debt first, while still staying current with at least the minimum monthly payments on lower-interest cards.

If making even minimum monthly payments is problematic, consider other debt negotiation strategies as described here.–Andrea Rock  

Comments

[kyle5434]

Or use Dave Ramsey's debt snowball method to get the psychological advantage of knocking out smaller debts first and getting some "quick wins" to help keep you motivated. The "mathematically correct" approach of attacking the highest interest rate is hard for many people to maintain if the highest rates also correspond to the largest debts - if people are the "mathematically correct" type, they likely wouldn't be so deep in debt in the first place.

[Edna Ferman]

The article has great information regarding the use of calculator to help in wiping out
credit card debt. The calculator is a great tool to anyone who is struggling with credit card debt and unable to get out of it.
To get out of your credit cards debt is very important but one has to look at how to reduce the credit card debt from that point on.
Together with using the calculator, other measures should be taken:

• Stop spending on credit cards in order to reduce the balance without adding more debt.
• It is not big deal to reduce your debt at one end but to add more on the other end.
• If credit card debt is a struggle, a severe step should be taken to eliminate all credit card debt and this step is to stop using credit cards all together.
It is very easy to buy with a credit card; you do NOT feel that you are spending money when you sign for your purchases. Signature does not register in our minds as money.
But when you are paying with cash (real money), you feel that you are using money, you can count the money and see right away how much is left in your wallet.
You limit yourself to what you can afford and you spend only the money you have.
• Another option is to use a debit card for all the day-to-day expenses.
Debit card is similar to cash money – you can spend only the money you have in your account without getting into more debt.
• Consolidate credit card debt so you have fewer accounts to pay.
• Contact the lender and explain the situation. Ask the issuer for a lower interest rate.
• Ask the issuer to help you with a payment plan.

All those measures together with the help of the calculator will be the answer to credit card debt.
One should strive to pay off all debt and to pay it on time. The most important advice at this stage of struggling with credit card debt is to stop using credit cards until all current debt is paid off.