Everyone knows that credit cards are notorious for the fees they charge. But you are even more likely to be caught in the trap of carrying credit card balances. In fact, credit card balances can be one of the biggest hits to your personal finances. When you carry credit card balances, you are paying for nothing more than the privilege of borrowing the money. The minimum payment goes mostly to interest. This is why credit card balances can be so detrimental to your personal finances.
Consumer Reports, in February’s issue, points out some interesting numbers that apply to many average Americans:
If you have a card with an interest rate of 15 percent and you pay only the minimum rue each month, it will take you 22 years and 2 months to retire a $5,000 debt, and you’ll have paid $5,729 in interest.
That means your total payoff will be nearly $11,000 on that $5,000 credit card balance. And many people have more than a 15 percent interest rate. Most have between 18% and 29% on their cards.
One of the best things you can do for your personal finances is to carefully evaluate what you use your credit card for. They can be helpful when used correctly, but you need to have the discipline to pay it off every month — or at the very least carry credit card balances for no more than three to six months.