If one day I decided to just pay the minimum payment on all of my bills for the rest of my life, what's the worst case scenario?

If you make only the minimum payment on all your bills, wouldn’t the accumulation of interest on those same bills end up making you pay twice or three times as much or more in the long run?

You will be paying a ton of interest, 2 oe 3x the purchase price as mentioned, on your balance, your credit score might be impacted by never fully paying off your debt. You may find it hard to get loans for a mortgage or other purposes. The mindset of “well there’s always going to be SOME debt” is not a wise one, and can lead to relying heavily on your credit cards and digging the hole deeper and deeper. I always strive to reduce my debt.

True and true, but it’s still a good question.

You’re talking about credit cards, right? My guess is that eventually you’d hit your credit limit, and would no longer be able to use that card. Your credit score would go very low. Because of that, it would probably very difficult or impossible to get a new credit card. But if you always pay the minimum on time, you probably won’t have any bill collectors coming after you.

That’s my guess.

Well, you can be broke for the next 5 years and pay off your cards and then be debt free with no minimum monthly payments. That is assuming you have the control to stop using the cards.

Or you can continue paying the minimum and never actually make a dent in what you owe.

The credit card companies would prefer that you go with the second option.

Then you pay the minimum balance the rest of your life.
Better to pay more, get em’ paid, and don’t get indebted.

You’d better live long and not plan to prosper.

That’s basically what the U.S. is doing, and you can see where it’s gotten us. :)

If you pay off your debt, there may be a time without debt. And then you have all of your resources at your disposal, to use as you will. You might even be able to retire if you have saved enough, and not have to work at all unless you want to.

The worst-case scenario is like the opposite of this. Because you will always be paying more money, you will always have to work. Because minimal payments may not even cover your interest, you may owe more every month, and if it hits the limit and goes over, you will owe even more. This will cause your minimal payments to go up and will give you fewer options for gaining more credit in the future. And this way, you could be paying for a small purchase for the rest of your life. Imagine being 80 years old, unable to quit working, and then something happens – you break a hip or something – and then everything spirals downward from there.

That said, credit card companies LOVE when people only pay the minimum, because they make the most money on people like that. It’s people who pay off their bill every month and pay no interest that they hate. And something about being Visa’s favorite kind of customer chafes me.

Just pay ‘em off. Pay it all off. Stay out of finance hell.

I mean, we’re going to be in debt no matter what for the rest of our lives anyway

Huh?

Agreed with nikipedia. Debt for the rest of our lives??

Of course. How big is that rock that u live under? Can u find one person who never owes anybody ANYTHING, EVER?

@Boy: Well, there is off-the norm me, as usual.I will have my car paid off in March and will then be debt-free.

But ur not debt-free right now you’ll also have to pay to fix your car if it ever malfunctions. What about insurance? you’ll always be indebted to insurance companies long as you have a car.

When u buy a house in the US, most people take out loans from the bank that they must pay back, not to mention the interest that comes with it. the system is designed to keep certain people in debt forever. It’s like a game of musical chairs. When the music stops, everybody gets a seat except for the poor, who get left standing and suffers from being given the short end of the stick.

I do live in a cash economy, it is true. I do not, however, consider car maintenance, food, heat, home and car insurance,etc as debt. I pay bills that have no interest attached to them.

Boy, you are raising another topic now. The economy does stink and the less-well-off are suffering, it is true. I have no simple answers for that. I personally have always lived within my means, saved regularly, not been a shopper or purchaser, own very few gadgets and wear more clothing indoors now to keep my heating bill down.

If you pay for stuff with your credit card, yes, that is borrowing and debt. However, if you spend wisely and pay it off every month, you’re not paying interest on it. You’re only paying for the value of what you actually bought.

Just paying the minimum, though, ensures that you’re paying for the rest of your life for something you probably already used up and threw out. You’re paying way more than you have to.

It is important to note the difference between paying things off and paying compound interest. Please also note that just because you may be paying for 30 years on a mortgage doesn’t also mean that you want to pay for 30 years on a pair of jeans.

BoyWonder asks, Can u find one person who never owes anybody ANYTHING, EVER?

Yes, me. Smart investments by my parents combined with working throughout school let me graduate from university with no debt, now I’m in a high paying job at a young age. I have a credit card which I pay off each month, it actually earns me either $20 or $40 a month of free groceries thanks to the reward points. My car is an old hand me down from my mother with a few problems, but she runs fine. I rent an apartment, and am saving to buy a house when the housing market cools off in a few years. I live within my means and don’t spend more than I earn, that’s pretty much the key to not being in debt. Now that gas is lowering in price I can put an extra $25 a month into my retirement accounts. Compound interests hurts when you’re the one paying but works great when you’re the one investing, compound interest on retirement investments can leave you with millions, yes millions, more when you retire if you start young. Sometimes it’s scary to sit down and truly see where you are financially but you need to do this to know how to remedy the situation. It is tough being cheap, but paying off your debt is the one of the best things you can do for yourself.

@dynamic: Good on you! Not everyone is as lucky, but you’re right: the key is to live within your means, and make paying down debt a top priority.

Also, I’m no expert, but the housing market looks pretty cool as it is. (Cool as in “not so hot.”)

I’m in Canada. While we are very linked with America economically, our banks haven’t been too affected by the recent economic issues. Our housing market is also a bit behind the States’, so houses are a bit inflated at the moment. I recently read an interesting book on the Canadian housing market called The Greater Fool which goes into depth on the issue. Plus I’m still saving money towards a down payment so as to minimize the amount and length of the mortgage… I honestly can’t imagine signing for even a 25 year mortgage on a property that is not my final resting area. I don’t like to be in debt nor tied down, that’s one reason I’m loving renting now.

@Boy: Since when was paying for your broken car considered being in debt? Likewise, since when was paying your insurance bill ever considered debt?

I guess we see it differently; In my mind debt is a means of using future purchasing power in the present, before a summation has been earned. Basically, you are only in debt if you don’t have enough money in the bank to pay for a particular service or you begin paying interest on the money you owe. Secondly, if your liquid assets outweigh your liabilities, I wouldn’t consider you to be in debt either. What is your definition of debt?

There is no way I would start paying minimum payments on my bills. Overtime that turns into a lot of money. By paying off my mortgage 20 years early I am saving about $200,000. Why wouldn’t I do that? I could buy another house for that money.

Are you familiar with compound interest and how that works? If not I would take a serious look into it.