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Avoid making the minimum payment on credit card debt

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Interest rates are expected to go up at least two more times this year. That's bad news if you carry a balance on your credit cards, and it's double trouble if you only make the minimum payment.

Making the minimum payment never works in your favor. Which is why credit issuers are required to spell it out on your monthly statements. But for a lot of people, the message is not sinking in.

Part of Becky House's job is to help you understand how minimum payments are not in your best interest. She's a professional debt counselor with American Financial Solutions, an accredited, non-profit credit counseling service.

"Sometimes I think that it's really just showing it in black and white," said House.

Here's what can happen: Say you have a $5,000 credit card balance with an interest rate of 18 percent. Your minimum payment is $175, at first.

"But as you pay down that five thousand dollars, the payment also drops," House explained. "Your payment's dropping, but you're still getting hit with interest because you haven't paid the balance off in full."

If you continue to only make minimum payments, House says revolving debt calculators show it'll take you 13 years to pay off that $5,000. By then, you'll have paid a total of $8,500. That's $3,500 in interest alone.

"Which means I'm going to lose 35-hundred dollars by just making those minimum payments!" House emphasized.

Bottom line? Always pay more.

"Even if its just a little bit, a little goes a long way," said House.

And before you buy things on credit, consider how much you stand to lose if the minimum due is all you plan to pay. That's especially critical to keep in mind if you keep adding charges to your balance, when the minimum payment is all you're making.

If you realize your debt is out of control, now's the time to get help.

But stay away from companies that promises to solve your problems for a large up-front fee. Find an accredited, non-profit credit counseling service with certified credit counselors who will provide education and budget assistance as well as help getting both your debt and spending under control.

Non-profit debt and credit counseling agencies typically charge a nominal fee to cover materials and education, taking into account what you can afford.

You can find an accredited non-profit counseling agency as well as plenty of helpful information about debt management, by checking with the National Foundation for Credit Counseling.

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