Would you give away $50 for nothing? No way, right?! Unfortunately, 177 million of us are doing just that and giving away over $50 to our credit cards in the form of finance charges—every month.
You see, the average American has about $4,500 in credit card debt, and with a national average APR of 14.83 percent, that adds up to $52.16 per month in interest. The grim reality is that Americans are far into the red with almost one trillion dollars in credit card debt, and with losing so much to interest, no wonder it’s hard to pay it down.
Let’s talk about Mrs. Smith. She has a $6,000 total balance on her credit cards, and she’s trying her best to minimize what she charges to her plastic so she can pay down her bill. Unfortunately, spending with her credit card is difficult to resist. After all, paying electronically offers convenience, rewards, and pain-free transacting—until she gets her bill at the end of the month. And because Mrs. Smith sometimes needs to use credit to buy things she doesn’t have the money to pay for immediately, she’ll be charged interest on the balance and the cost of that item will continue to increase over time.
Just like Mrs. Smith, it’s hard for Americans not to get sucked into credit card spending, especially when there are so many cards out there. At the end of last year, there was a combined total of 489 million credit cards in circulation in the U.S.—and that’s counting only American Express, MasterCard, and Visa—so the actual number is even higher. That averages out to 3.5 credit cards for each U.S. cardholder! With so much plastic in our wallets, it’s easy to see why Americans have racked up almost a trillion dollars in credit card debt.
As Americans, we work hard for our money and want to save as much as possible. Credit card debt is a major problem in the United States, but the good news is that as a nation we’re on the right track and consumer debt is shrinking. So take some time to analyze your debt and figure out a way to pay it off faster. After all, the sooner you do, the sooner you can start paying yourself $50 a month.
Stay tuned for next week’s entry where we’ll discuss tactics for paying down your credit cards. Until then, check out our posts covering how to maximize your savings, build an emergency fund, and improve your credit score.