Credit cards can be a convenient way to access your money and manage your spending. Often, however, consumers use credit cards excessively, even creating balances up to the credit limit.


As a responsible user, you should abide by the basic rules of budgeting. Live within your means and only charge what you can pay off in a reasonable amount of time. I’d recommend using a maximum three month pay off period as your guide.


The credit card account minimum payment is calculated as a percentage of your balance, typically 3%. So, how much does revolving credit really cost you?


As you can see, paying only the minimum will cost a significant amount of interest; in some cases nearly as much as your purchase cost. Plus, you’ll be paying for a very long time.


To pay as little interest as possible, you should pay much more than the minimum. By doubling the payment on the vacation, for example, to $600 per month, the term would be cut in more than half, from 16 years to 7 years. For convenience, this calculation is available in the Payment Information section of your credit card statement.


Credit cards are an important part of building credit. However, it’s prudent to try to pay off cards in full each month. With controlled spending and timely repayment, you will raise your credit score and save money in the form of lower interest rates.


by Jenna, Vice President, Operations