# Analysis of Credit Card Debt

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MAT109 A01

Introduction

Credit card debt is one big struggle in America. This is due to poor income, divorce settlements, unemployment and even gambling. Don’t have any health care benefits? In need to go to the doctor? If yes, then there is a medical bill coming your way. Taking out loans and borrowing money creates more debt if you can't pay it in on time. Many debt collectors need to be consolidated and it all starts out with you. Debt collectors should be consolidated because the economy is in terrible need.

Calculations

Let’s say for instance, if I had a balance of $5,270.00 on my credit card with an (APR) annual percentage rate of 15.53 percent. Most credit cards may require you to pay a 2% monthly minimum worth the balance. Based upon a balance of 5,270.00, I will multiply the 2%, which will equal a minimum monthly payment of $105.40. And with a 15.53 percentage rate; we will multiply 5,270.00*.1553, which equals out to $818.43. Therefore we take $818.43 and divide it by 12 months per year, which equals a monthly interest total of $68.20. Finally, we’ve calculated a total of $105.40 per month, therefore only $37.20 will be applied to the principle.

Analysis

For example, assume you have a credit card with a current balance of $2,000, an interest rate of 18%, a minimum percentage of 2% plus interest, and a minimum amount of $15. The initial minimum payment required would be $70 greater of $2,000 x 2% + $2,000 x 18% / 12 or $15. If you made only the minimum payment each month, it would take you 114 months to pay off the debt, and you would pay total interest of $1,314. For example, if you made monthly payments of $100 on the credit card debt above the initial minimum payment was $70, it would take you only 24 months to pay off the debt, and you would pay total interest of just $396. There are no other charges applied to this...

References: 360financialliteracy.org. 2014. Debt Payoff Strategies - 360 Degrees of Financial

Literacy. Available at: http://www.360financialliteracy.org/Topics/Credit-and-Debt/Debt/Debt-Payoff-Strategies [Accessed: 2 Apr 2014].

Bdodebthelp.ca. 2014. Consumer Proposal Example - BDO Debt Help. [online]

Available at: http://www.bdodebthelp.ca/EN/consumer-proposals/Pages/example-of-a-Consumer-proposal.aspx [Accessed: 2 Apr 2014].

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