Credit Card Minimum Payments: Who knew??!

The consumer culture has become a complicated and complex place to live. Dealing with money is no longer simple and straightforward. It’s easy to make financial mistakes that haunt us for years, yet insights to help us navigate through the tricky parts of the system are fragmented and inconsistent. I observed this during my 27 years teaching a college course in consumer economics, and it concerns me. That’s why I wrote Conscious Spending, Conscious Life. I hope this book will bring coherence and consistency to the way we think about money and how we deal with it.

There are so many things that people just don’t know. Early on, I discovered that many students thought if they made the minimum payment on their credit card balance, they weren’t in debt. They used their credit cards and paid the required minimum, thinking they were doing the smart and adult thing. However, that was an illusion.

When we see situations in their true light, they come into focus in a new and clearer way. Here’s an example: $3172 in purchases on a credit card at 18.5% with minimum payments of $63/month. Assuming nothing else is bought on this credit card and the minimum payment is faithfully made each month, the last payment will be made 42 years and 8 months later, according to information printed on the credit card statement from which this example was taken. Over those 42 years, interest amounts to $9,451. That is three times the cost of the goods themselves! A total of $12,263 will be paid for purchases worth $3172.

Knowing this is an eye-opener. Knowing how to find this out for ourselves is a game-changer. For that reason, I include many links to information sources such as the Financial Consumer Agency of Canada.

When we ask questions—i.e., how much will this really cost me?—and independently check out the answers, we are less likely to make long-lasting and serious mistakes because we understand the implications of the action we take. In other words, we are acting consciously.

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