Use this calculator to help wipe out your credit card debt

If you're carrying credit card balances and have joined the growing ranks of consumers who are resolved to wipe out that debt, the Federal Reserve offers a useful tool that can motivate you to translate your good intentions into action.  The Fed's free credit card calculator that shows how long it would take you to pay off your card debt at its current interest rate if you made only the minimum monthly payment, along with the grand total of how much you'd pay in finance charges over that time. 

Let's say you were carrying a $6,000 balance, which is roughly the average total credit card debt an individual cardholder carries on bank-issued cards.   Let's assume further that you were paying 17.9% interest, which is the increased rate that Capital One recently imposed on many of its cardholders.   The Federal Reserve calculator reveals that if you made only minimum monthly payments of $120, it would take 37 years to pay off that balance and cost you $15,523 in interest charges over that time.

The calculator also shows the impact of various plans for paying off that debt sooner.  If you select five years as your deadline for paying it off, you'd need to make monthly payments of $153 a month and the total interest you'd pay would drop to $3,123.   If you aimed to get rid of the debt in just two years, your monthly payment would be $300 a month and your total interest tab would come to $1,183.

Even if you're paying the average variable credit card rate in the U.S., which is currently 11.04 percent, according to Bankrate.com, making only the minimum monthly payment still will keep you in hock for a long time. It would take 19 years to wipe out that $6,000 balance if you were paying a monthly minimum of $120 cost you $4,605 in finance charges at that interest rate.

To develop a credit card debt repayment plan that gives you the most bang for your buck in wiping out balances and minimizing interest charges, gather copies of your most recent card statements to make a master list of current balances and finance charges for each card. Then put that Fed's calculator to work to devise a strategy that devotes as much money as possible to wiping out high-interest debt first, while still staying current with at least the minimum monthly payments on lower-interest cards.

If making even minimum monthly payments is problematic, consider other debt negotiation strategies as described here.–Andrea Rock