If you’re still paying off your credit card, you may have noticed that your monthly statement got a makeover this year. The Credit CARD Act of 2009 required that all credit card companies change the look of their bills starting February 22, 2010. Now credit card users can easily see important information on their statements without pulling out a magnifying glass.
According to the legislation, information like interest rate, penalties and minimum payments must be clearly visible on the statement. Every credit card bill is required to feature a box that tells the consumer how long it will take to pay off the balance if only minimum payments are made. Going a step further, the statement will also give the total dollar amount cardholders must pay once the interest and principal have been calculated in. Another innovative feature is a box showing how much you need to pay each month for the card to be paid off in three years.
The new look will hopefully force credit card holders to see the big picture. Among the updated design, readers can easily spot when payments are due, the amount that is owed, any payment penalties and the amount paid toward fees and interest on each account. Now that the information is front and center on the statements, many people will become much more aware of their financial status.
Let’s take a closer look at how this updated design will help you plan for the future.
You get your credit card statement in the mail and notice an $8,000 balance. This time, however, the new statement will take it a step further and break down the math for you. You will still see the $8,000 amount, but you will also see how much you owe if it takes you three years to pay it off at 22.99% APR (rates vary from card to card). Suddenly that $8,000 bill turns into an $11,308 bill!
But wait, it doesn’t stop there! Let’s say you decide to continue paying just the minimum payments toward the $8,000 credit card bill. Any idea how long it will take you to pay that sucker off? Almost 50 years! That’s right, if you continue to only make the minimum payments on the credit card bill, in about 50 years you will finally have paid it off. But here’s the real kicker—your $8,000 bill will have nearly quadrupled by then for a grand total of around $33,000!
Seeing those numbers clearly displayed for you can be like a punch in the gut. Most people have no idea that only making minimum payments on an $8,000 credit card bill would actually amount to a $33,000 bill. It’s definitely an eye-opening moment for most credit card users.
So take our advice and pay off those credit cards as fast as you can! Pick up an extra job or two, and work that bill out of your life forever. Once you’ve paid off all your credit cards, close them out, and promise yourself to never use them again.
Trust us, it will be worth it.
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