By the end of 2016, Americans will hold more than $1 trillion in collective credit card debt. If you are one of the many of Americans struggling with credit card debt, making the minimum payments on your cards each month may not be helping as much as you think it is. In fact, it could easily be doubling your debt over time.
Credit card debt typically comes with relatively high interest rates compared to mortgage loans or auto loans. The average interest rate on a credit card currently sits at around 15 percent, but it often surpasses 20 percent for cardholders with below-average credit.
Take A Second To Do The Math
Here’s a simple example of the damage that the combo of high interest rates and minimum payments can do over time:
If you have $3,000 in credit card debt at an interest rate of 15 percent, your minimum monthly payment will likely be $25. If you never add to that debt (i.e. stop using your card) and simply attempt to pay off that $3,000 debt over time making only minimum monthly payments, you will end up paying a total of $6,640 on your original $3,000 debt.
How is that possible? It will take 16 years to pay off your debt making only minimum payments. At a 15 percent annual rate, that means…
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