Read Your Statements!

I'll be the first to admit that prior to January 2012 I rarely, if ever, read my statements. Because Donna and I are in the process of paying off and closing all of our credit cards we have been looking at the statements so that we'll have the address we'll need to send the letter to close the account, etc.

This past weekend I was reading one for the Barclay Card we have. I got this card on a whim when I found out I could earn iTunes points. Yes I fell for the whole I get points on this card thing. We actually have used it enough to earn a $25.00 iTunes card but I really don't need this credit card so this month we will pay it off and close it.

Below is a screen capture of part of the statment. Two things jumped out at me. First is what I highlighted in red which is the Late Payment Warning. Read that closely. By not paying the minimum which for this card and the balance on it at the time was $20.00 you could be charged a late fee of $35.00 (1 1/2 times the minimum payment amount) plus your APR may be adjusted to a penalty APR of 30.24%. 30.24 - seriously. OUCH!

Just for fun let's pretend the current balance is $6758.10 instead of $675.81. The current interest rate for new purchases is 16.99%. Assuming minimum payments of $100.00 per month. It would take us until Sep 2030 to pay the card off and we'd pay $15,595.73 in interest.

Now let's assume we didn't pay our payments on time and the bank jacked up the interest rate to the penalty rate of 30.24% We'll use the same current balance of $6758.10, interest rate of 30.24%. Minimum payments of $175.00 per month. It would take us until Mar 2024 to pay the card off and we'd pay $18,683.38 in interest. For simplicity sake we'll assume that once you get bumped up to 30.24% that you can't drop back down.

At first it looks like you'll get out of debt faster with the higher interested rate but that's not correct. The issue here is that I had to enter a value of $175.00 per month just to get the calculator to accept the parameters with the 30.24% interest rate. What's interesting is if you take the first scenario and bump the payments up to $175.00 per month which is $100.00 minimum plus $75.00 extra per month you'll be out of debt by Oct 2016, will pay a total of $3,092.35 in interest, be out of debt 13 years, 11 months sooner and will save $12,503 in interest payments! I can't stress enough that paying extra on your loans is the best way to get them paid off ASAP.

The second thing I wanted to point out the staement even shows you how you can pay off the debt a year early (see green section). If you increase your minimum payment from $20 per month to $24 and don't add any more debt on the credit card you can shave an entire years worth of payments from the card. I think it's a good thing the banks are including this information.

How about you? Do you read your statments or do you just look at amount owed and move on to the next one?