Paying more than the minimum important to debt management

10.27.09
By Timothy Jones

People who are struggling with credit card debt may get a break in the coming months when it comes to how much lenders can charge for interest and late fees. However, the amount one makes on monthly payments can be an equally important factor.

A recent report in the Philadelphia Inquirer noted that a household with $9,827 in credit card debt making minimum payments at 10 percent interest would take at least 26 years to pay down the balance. This figure assumes a minimum payment of 2 percent of the balance as well as $6,812 in added interest charges.

The report added that with a higher interest rate, it could take "more than a lifetime" to pay down a balance of that size.

Generally, people struggling with high credit card debt are often advised to target the account that carries the highest rate of interest first, before moving on to less expensive accounts.

Consumers can also try to consolidate accounts as they pay down balances, although this has become more difficult in the current financial environment.

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Paying more than the minimum can be an important debt management strategy.