Comparing credit cards can be confusing. In 2010, legislation was enacted to try to help govern credit cards and make them more consumer friendly. Read more about the Credit Card Act here. One of the mandated changes was a standardization of how credit card rates and fees are disclosed.
The good news is, you now have everything you need to compare credit card offers. My last post talked about credit card disclosure. This post is all about credit card statements.
Credit card statements have undergone significant changes. The Payment Information box is the key to understanding the true cost of credit. This box should appear on all of your credit card statements. It’s easy to use as a reference and will tell you what you need to know.
The Payment Information box uses the actual balance at the end of the billing cycle and calculates:
1. How long it will take to pay off the balance making only the minimum payment
2. How much you would have to pay monthly to pay off the balance in three years
3. The savings between the two calculations
Here’s an example:
With a balance of just over $6,400, the minimum monthly payment is $193 and it will take approximately 11 years to pay off the balance (assuming no additional charges are made). Increasing the minimum monthly payment to $210, reduces the payoff by 8 years and nearly $1,500.
This is a powerful tool in helping you evaluate which cards are costing you the most money. If you have several cards with various balances, it might make sense to consolidate your balances to your lowest cost card, or consider a fixed-rate, fixed-payment personal loan which could save you more money and improve your cash flow.
Our friendly loan representatives can answer any questions you may have about your credit card statement or consolidating debt.
by Kristin, Vice President, Marketing