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Why Is My $20 Bill Only Worth $5 Bucks?

Leslie Sausage
Credit Card Management

Keep this in mind next time you're tempted to "put the pizza on plastic".The following information is based on an interest rate of 16.99% to 18.99%:


If your balance is $1000.00 and your minimum required payment is $20.00, then $15.00 of the payment goes to interest and only a small portion pays down the principal. If during the next month you charge $15.00 or $20.00 on that card the same thing happens again.Here's a common scenario for many credit card users...

With a $1000.00 balance on your card and a $20.00 minimum payment due ($15.00 will be for interest. Only $5.00 will be for the principal to actually pay down the balance. Your new balance is $995.00.Yep! You paid $20.00, but it was only worth $5.00

By only paying the minimum due, you'll not be able to get off this merry-go-round for years!! You must work hard to get the balance down and here are just a few ideas:

  • Double the payment. This way your $40 will count for $25 on the principal rather than only $10 if done separately.

  • Avoid using the credit cards and thereby raising the balance.

  • Use cash for those little expenses that REALLY will multiply when charged to your credit card.

  • Pay the bill on time! One of my credit cards charges a $29.00 late fee. Yikes!

  • Watch that credit limit. Some cards charge a fee if you go over you credit limit--mine charges $29.00 for that privilege!

  • Learn to be more frugal! Wait a little longer to buy new items, another week on the next haircut, bring your lunch from home, and so on.

Some reasons to avoid credit card debt:

  • It robs you of your time and money because of the effort needed to get it paid back.

  • It robs you of your peace of mind because it's nagging at you each month

  • Sadly, it's much more fun charging it up than paying down the balance.

Copyright 2000 by Leslie Sausage

About The Author: Leslie Sausage lives with her husband in rural Texas. She is the mom of four grown children, a freelance writer and an elementary school teacher! For creative, practical and fun ideas please visit her web site at http://www.heart4home.net

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January 16, 20060 found this helpful

A year later, I am still paying on my charge card and don't even remember what it is that I bought and am still paying for! This year, I decided to incur no new credit card debt and to work at paying off my existing balances. I am taking the advice from a post on Thriftyfun and using gift cards that I purchase for myself at my favorite stores, they are quick to use like a charge card but I won't be paying any interest to a charge card company; hopefully I am on my way to being charge card free!

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January 17, 20060 found this helpful

Nice article! Am showing it to daughter.

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