It would take 73 years to repay my credit card with the minimum repayment
Key takeaways
- I spent over $10,000 on my credit card last month, due to a combination of expenses and bills hitting at the same time.
- But what really shocked me was the estimated time it would take to repay the balance if I just paid the minimum: 73 years.
- What's next: That's a wild hypothetical, but it highlights the dangers a credit card poses if you ignore the payments.
I've spent a lot of money recently, so when I got a credit card bill in the low five figures I wasn't shocked.
But another detail in my bill really made my jaw drop: the estimated time it would take to pay off my card if I just made the minimum monthly repayments.
73 years.
If I only paid the absolute minimum required by my bank each month, it would take me 73 years to get back to zero. And it would cost me almost $64,000 in interest.
Here's what my statement said:
73 years?
By law, credit card providers have to spell out this worst case scenario on your monthly statement. And most people don't just pay off the monthly minimum and let the debt balloon.
I always pay my credit card bill in full to avoid interest charges. I'm here to earn points, not give the bank extra money.
But this little detail highlights just how much money you stand to lose (and your bank stands to earn) if you don't take your credit card repayments seriously.
Struggling with card debt?
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The danger of a credit card
Unlike a home or car loan, which has a set term, a credit card debt can roll along for years or decades, costing you interest.
And with credit card interest rates as high as 22%, you could be looking at the worst credit scenario of all: a high-interest debt that never goes away.
Most Australians are pretty responsible with their credit cards. The average credit card balance is $3,655 per card, according to RBA statistics.
And most of us pay our balances off. The average unpaid credit card balance is much lower, at $1,784.
But Australians do rely on their credit cards: 29% of us can't manage our finances without one, according to Finder's Consumer Sentiment Tracker.
4 tips to make sure you stay on top of your credit card
- Keep track of your spending. Use your card or bank app (or a third-party app) to track your spending so you're not surprised at the end of the month.
- Check your statement. As soon as you get your monthly statement, take a look at it. Repaying this balance is your goal.
- Pay off as much as you can before interest charges kick in. It's best to pay the entire balance off each month to avoid interest charges completely. If that's not possible, focus on paying off as much as you can as soon as you can. Break the debt down into smaller installments and repay it month by month. Limit spending on the card until the balance is under control.
- If you're struggling to repay your card, consider a balance transfer credit card. You can switch to a 0% balance transfer credit card offer and repay your outstanding balance with 0% interest for up to 24 months with some cards. This gives you breathing space to pay off a bigger balance (or multiple card balances) without the interest piling up on top.
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