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The True Cost of Debt

If you have credit card debt, you are not alone. In fact, the average American has somewhere around $5,000 in credit card debt. Although $5,000 appears to be a relatively low figure on the surface, over time, the interest being paid on that balance can, and will, add up. The true cost being paid on a seemingly low credit card balance is a lot more significant than you may realize.

Interest Adds Up

The average interest rate on consumer credit cards is around 16.5%. That rate alone is alarmingly high, and what many people don't realize is that they are actually paying interest on their credit cards on a daily basis. So what does that really mean? Well, if you carry a credit card balance of $5,000, you are paying $2.26 in interest every single day, or a total of $67.81 every month in interest alone. Remember, none of the interest payments you make go toward paying down your balance, so if your minimum monthly payment on your credit card is $75, you are really only paying $7.19 per month toward your actual balance. At this rate, and assuming you do not make any other charges on your card, it will take you around 25 years to pay off that $5,000 balance and about $20,000 in interest alone. When you consider how else you could have invested five figures over the course of 25 years, the true cost of debt becomes clear. Instead of adding additional funds towards retirement planning, you have paid $20,000 in interest with nothing to show for it.

It is crucial to pay more than the minimum balance on your credit cards each month. Paying down your credit card debt should be one of your top priorities in order to help secure your financial future. Any extra amount you can put toward your balance will help, so take a look at your monthly budget and see where you can cut costs to apply that money toward your debt.

If you are having trouble managing your budget or your debt, consider credit counseling or a debt management plan. Advantage CCS can tailor a plan specifically for you and your situation. Contact us today for more information. Our counselors are available in person, via phone, or online to help you today!