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Minimum payments are a ploy to encourage long-term debt

How is boiling a frog like paying credit card debt? The answer to this admittedly odd question could make you rethink how you handle your credit card bill every month. But to understand the analogy, you must first understand a little bit about frog biology.

You see, if you try to put a frog in a pot of boiling water, it will likely recoil and try to escape. But if you take the same frog and put it in a pot of cool water on a stove, it will typically stay still. And if you then turn on the burner and slowly bring the water to a boil, the frog will remain still right up to the point of its demise.

And this is the idea behind the minimum credit card payments. By allowing you to pay the minimum every month, the credit card company is encouraging you to get used to carrying long-term debt. And the longer it takes you to pay your debt, the more money you will be handing over in interest.

So, the same way the frog grows accustomed to the water getting hotter, credit card companies want you to grow accustomed to paying the minimum month after month as you get deeper in debt. And this strategy is extremely effective. In fact, a recent study revealed that as much as 20 percent of surveyed cardholders would always stay just a bit ahead of the minimum, even when the minimum was lowered.

Credit card companies are well aware of the allure of minimum payments. But the fact is, if you are facing financial hardships, the minimum may be all you can afford to pay. And if you have a large amount of debt, the interest rates could be crushing.

You can halt the growth of  credit card debt  by filing for Chapter 7 bankruptcy. With Chapter 7 bankruptcy, you can get your debts discharged, allowing you to achieve a fresh financial start. And a Texas bankruptcy attorney can advise you all of the other benefits afforded to those who choose to file for Chapter 7.

Source: The Washington Post, "The psychological trick that makes it harder to pay off your credit cards," Jeff Guo, November 4, 2016

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