Cashtoons

Credit Cards part 2

June 24, 2021

Last week, we left our debtor having paid the minimum payment of $25 on the $1,500 owed for car repairs.

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.

payment broken down

How long will it take to pay off this repair at this rate? Over 12 years.

large hour glass

By the time the $1,500 in principal is paid, this person will have paid $2,366 in interest!

stack of interest vs principal paid

This is pretty bad, but it can get much worse. What happens when interest owed is compounded?

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.”

Einstein

Sources

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


© 2022