Paying only interest on your credit card loan. It’l screw up your credit rating! Credit cards are nothing else but borrowing cards.
The banks who usually gives them, are in the business to make money and a lot of it. Interest on loans are huge. A typical $3,500 dollars card balance, making just the minimum monthly payment will take you around 35 years to pay off. Wow!
When people miss the payment deadline on their credit card payment, banks know what’ll come. -Even slower payments in most cases.
At that point, credit card companies start to worry and making offers to card holders they might consider. One of these are, pay the interest only on your credit card and worry about the principal (the actual loan amount) later.
The reason for this, is the above. Huge interest profit. Once you accept anything like it, from that on your credit rating will have a mark on it as a non payer or late payer.
Paying the principal only, would not make any money for the bank, just give them their money back. No profit in that.
The way they calculate the interest on loans very by country. In the more developed countries when you make a payment on your credit card some of that money goes towards the principal amount and the rest for interest. First the principal amount is very tiny. Say, out of a $30 dollars payment $29.89 goes into the interst and the remaining $0.11 into the principal (this is just an example)
As you keep paying the loan year after year, the balance changes and with each successive month or year more and more of that payment goes into the principal. By year 30 most of your payment will pay the actual loan amount.
In other countries, like those in the former Soviet block (Eastern Europe) the interest is paid off first and the princiapl after all the interest is paid. This type of lending was outlawed in the USA a long time ago.
But in either case, if you just pay interest only on a credit card, your credit rating will be downgraded and if you want to get a loan for a house or a car, that’ll be taken into consideration and you probably won’t get that loan or mortgage.
Credit card companies will offer you to pay off the loan only after the offer for interest only payment fails. By that time most people stopped paying all together and at that point the credit card companies or banks just want to get their money back.
If they can’t, they’ll offer you a lower (settlement) amount. usually in the form of a letter saying something like this. “if you pay this amount $…… within 7 days (or whatever days) we’ll forget the rest”.
Doesn’t matter what you do, because you can’t save your credit rating. They employ make you feel good tactics, like -we know everyone can get into some financial difficulties from time to time and we would like to work with all of our clients to help them solve it. If you give us a call we can work this out positively etc, etc, etc.
You don’t need to feel sorry for them. they are pure cold money making machine and if situation arise, they would not hesitate to ruin you completely.
Don’t fall for make you feel good tactics. Moral belongs to the losers is their slogan.
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Read more about what happens if you don’t pay your credit cards
Paying interest only on a credit card