Tuesday, November 28, 2006

fun during the holidays: priceless

I just finished watching a show about credit cards on PBS's Frontline. Here are some approximate numbers:

145 million = Americans with credit cards
55 million = number who pay entire balance each month
90 million = number carrying a balance (over $8,000 on average)
35 million = number of the 90 million who make just the min. payment

Q: How long would it take to pay off a $1,000 balance if just the minimum payment is made?

A: You can plug in your minimum payment percentage and interest rate (apr) to see how paying just the minimum would impact you by using this calculator. However, a typical minimum payment is 2% of the balance. The interest rates vary but 21% is not uncommon. If this were the case, it would take 33 years and one month to pay off the thousand.

Total payments (not including postage) would be $5,198.06.

The interest would be $4,198.06!

This is being overly optimistic because it assumes no additional purchases are made with the credit card. In reality, people who pay the minimum keep on charging and will die in debt no matter how long they live.

What a legacy to leave your children and grandchildren.

So go ahead, charge your Christmas presents. You don't have to think about really paying five dollars for every dollar spent. Don't multiply the cost by five and realize that you could pay off the mortgage on a house sooner. That's no fun.

Christmas with MasterCard.


1 comment:

Darlene Sinclair said...

Great post. You are pretty clever and funny, I must say...