To qualify for the program you simply need to check a box on the payment coupon and agree to a one-time fee of $19.95. Only consumers with bird brains could fall for this one. The biggest mistake any cardholder can make is to fall into the habit of paying just the minimum required amount each month. Most major issuers set their minimum payments at 2% of the outstanding balance or $10 per month. If you’re paying the average annual interest rate of 18.00% then your monthly interest costs are approximately 1.5% of the outstanding balance (18% divided by 12 months). A 2.0% minimum payment will cover the 1.5% interest costs each month, leaving approximately 0.5% to be applied to the principal or debt. Paying 3% a month will triple the amount you’re paying on the real balance, greatly reducing your interest costs.
For example if your current outstanding balance is $2,000 and you’re paying the average annual interest rate of 18% then the interest costs for this month would be $30. Making a 2% minimum payment ($40) leaves $10 to be applied towards your $2,000 debt. It doesn’t take a rocket scientist to realize it will take many moons to pay-off this debt and that the interest costs will be astronomical.
Under the scenario described above making a 2% minimum payment will drag your repayment period out for more than 30 years and result in total interest costs exceeding $8,000. A 3% minimum payment will reduce the repayment period to 10 years and cost about $2,500 in interest. Ideally you should strive to pay 5% per month which will clear your debt in less than five years and cost less than $1,000 in interest.
The real kick in the face is Capital One requires you to pay $19.95 for the privilege of being ripped off big time. Of course it shouldn’t be surprising such an offer would come from Capital One. After all, this is the same issuer that will jack up your interest rate to 24.9% for the slightest transgression of the cardholder agreement or for piling up too much debt elsewhere or falling behind with other creditors.
