Your Credit Card
Why Credit Card Debt Is So Expensive
A $5,000 balance at 23% APR with $200 minimum payments takes 32 months to pay off and costs $1,300 in interest. That's a 26% premium on whatever you bought.
Most credit card companies set minimum payments at 1-3% of the balance. At that rate, you could be paying off a $5,000 balance for over 20 years and spend more on interest than the original purchases.
The fix is simple: pay more than the minimum. Even $50 extra per month can cut years off your payoff timeline.
FAQ
Should I pay off my credit card or save? +
If your APR is over 7%, pay off the card first. A 23% credit card is a guaranteed 23% return on your money. No savings account or safe investment beats that.
Will paying off my card hurt my credit score? +
No. Paying off debt improves your credit utilization ratio, which helps your score. The myth that you need to carry a balance comes from misunderstanding how credit works.