Jessie Jimenez

Credit Cards and Compound Interest

Last week, we left our debtor having paid the minimum payment of $25 on the $1,500 owed for car repairs.
<img src="/images/interest-rate3.jpg" alt="principal and interest">
After adding the interest of $22.50 for the first month's payment. This person has only paid $2.50 of the principal.
<img src="/images/creditcard-interest.jpg" alt="payment broken down">
How long will it take to pay off this repair at this rate?
Over 12 years.
<img src="/images/Hour-glass12.jpg" alt="large hour glass">
By the time the $1,500 in principal is paid, this person will have paid $2,366 in interest!
<img src="/images/creditcardprincipal.jpg" alt="stack of interest vs principal paid">
This is pretty bad, but it can get much worse. What happens when interest owed is compounded?
<img src="/images/snowball.jpg" alt="snow ball">
Come back next Saturday to see why Einstein said, “Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”
<img src="/images/Einstein.jpg" alt="Einstein">
Sources
<img src="/images/sources1.jpg" alt="sources">
https://www.intentionaladvice.com/2018/11/08/einsteins-theory-of-compound-interest/
https://www.creditkarma.com/calculators/debtrepayment
https://www.valuepenguin.com/average-credit-card-debt
https://www.thebalance.com/annual-percentage-rate-apr-315533
https://www.thebalance.com/the-true-cost-of-credit-cards-1289627
https://www.cnn.com/2021/02/22/success/credit-card-payoff-calculator/index.html
https://wallethub.com/edu/cc/average-credit-card-interest-rate/50841