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The FICO scoring system uses a 10-point credit status rating system that ranges from 0 to 9. The following table depicts the various consumer credit types and the potential credit status rating ranging from 0 to 9. “R” stands for Revolving account; “I” stands for Instalment account; and, “O” stands for Open account.

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Credit card companies send us monthly statements showing the outstanding balances and suggest paying the minimum payments. Most of us just pay the minimum amount. We do not stop and think about the cost of the minimum payment.

Let me illustrate how the minimum payment method steals your money:

Let say, you need a dining set and you do not have the money to pay for it in full. You go ahead buy and charge the purchase to your credit card. You choose to pay $50 as the minimum payment. Incidentally, the interest that is being charged is 20%.

The question that I would like to ask you:

How long will it take you to pay off the balance paying $50 per month? How much interest will it cost you to pay off the balance?

The answers are extremely shocking.

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We all want to be free from debt and living without the fears that come from being in debt. We want to stop wondering where the next payment is going to come from. But we also want to have all those good things we see others having.

How can you reconcile both?

How can you have those things you want and yet still avoid the big debt payments?

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