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Credit card debt is a trap. Here's how to break free.

By Benjamin Platt, Contributing Writer

Credit card debt is a burden that you carry everywhere you go, but there is a way to escape from endless credit card payments. It’s nearly impossible to live in the modern world without at least one credit card, particularly thanks to the rise of online shopping and automatic payments. Many cards offer rewards, like a tiny amount of cash back, to make it even more appealing to charge every purchase. Even shopping in person is no escape; you can’t buy a pair of socks without stores trying to tempt you to sign up for their own branded credit card.

Credit cards are so ubiquitous that many of us don’t think of them as a borrowing from a lender at all—until it’s too late.

Here are some facts about credit card debt that may surprise you:

  • Americans reached a record $927 billion in credit card debt in 2017.
  • The average consumer had $6,354 in credit card debt in 2017 ($15,482 per household).
  • That year, the average household with revolving credit card debt paid $904 a year in interest alone.
  • Americans have an average of 3.1 credit cards each, plus 2.5 retail credit cards according to the credit bureau Experian.
  • 43.9% of households had credit card debt in 2016, compared with 38.1% in 2013.
  • In 2013 53% of the 105 million Americans with credit cards (55 million in total) could only make the minimum payments.
  • In 2014 more than 93% of credit card lawsuits went unchallenged by debtors.
  • Click here for more American debt statistics.

 

Americans are charging things that used to require cash or a check, like utilities and medical bills, with increasing frequency, often using automatic payment plans that can cause you to lose track of your monthly expenses. With rising interest rates, it’s easier than ever to overextend yourself. But even if you stick to a tight budget, as soon as you charge a purchase, you’ve entered into a system designed to extract payments from you for as long as possible.

 

The myth of the minimum payment

On their surface, minimum payment options may seem like the credit card companies are doing you a favor. We all have times when money is tight, so if you’re staring down a $5,000 statement, being able to pay $50 to protect your credit rating, keep your creditors happy, and just not have to worry about it for another month can feel awfully attractive.

In actuality, making only the minimum payment—as more than half of Americans do each month—is the biggest gift you could give your credit card company. It will more than cover their monthly costs, save them the trouble and expense of having to come after you for late payments, and the interest will ensure that they keep getting payments from you for years, or even decades to come.

The numbers paint a grim picture. If you’re 43 years old and you have $5,000 in credit card debt with a 19% APR*, and you only make the minimum payment each month, assuming you live to the average American life expectancy of 78, you will still be paying off that debt the day you die. Even if you live long enough to pay it off in full, you will have paid over $15,000—three times the initial debt—just in interest. And that’s assuming you never make any other charges on that card or get hit with any other fees along the way.

 

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"Minimum payments are designed to keep you in debt longer and for financial institutions to get more interest out of you," said Linda Sherry, director of national priorities for Consumer Action, a consumer advocacy group headquartered in San Francisco.

minimum payments

The snowballing interest prompted Mark Cuban of “Shark Tank” fame to call credit cards “the worst investment you can make.”

 

The risks of credit card debt

It is no surprise that carrying a high amount of credit card debt on a revolving basis can negatively impact your credit score. But it can affect your health, as well. A LendEDU study of 1,000 people with at least $5,000 in credit card debt found that the vast majority reported feeling stress because of their debt. Over half reported losing sleep over their debt, while nearly a third pointed to their debt as the source of headaches.

“Working with clients who have worked through financial stress, I can attest that they experience debt as a burden they feel like they can’t escape,” said clinical psychologist Shaun Wehle. That burden can lead people to withdraw from social obligations, keep secrets, and risk damaging important relationships at a time when they need the support the most.    

The LendEDU study found that:

  • 7% of respondents said their credit card debt had strained their relationships with friends and family.
  • 3% said they had tried to hide their debt from their children.
  • Over 30% said they had concealed their debt from a partner.
  • 2% said their spouse or significant other left them because of their credit card debt.

 

Relief is on the way

Credit card debt can feel insurmountable, but there’s good news. In his book, DebtCleanse founder and CEO Jorge Newbery calls credit cards, “among the simplest of all debts to cleanse.” Click here to download a free chapter from the DebtCleanse book to find out why.

If you feel like you’re being crushed under a mountain of credit card debt, there are steps you can take to take control of the situation.   

Looking for more assistance? DebtCleanse is launching in early 2019. You’ll be able to create a free account to get access to the debt tracker and Q&A forum, or upgrade to a full membership at any time to connect with our network of attorneys who are waiting to help you make your debt a thing of the past. Don’t live under the shadow of your debt a second longer than you need to.

Click here to find your debt solution.

 

Questions? Contact Us Today!

If you're struggling to pay minimums and can't see a way out, reach out to us to find out how you may be able to clear your unaffordable credit card debt for pennies on the dollar, and possibly for nothing at all. Fill out the form below or call 800-500-0908.



 


*Rewards cards like Chase Freedom, Citi Premier, Bank of America Rewards, CapitalOne Rewards and others typically have variable rate APRs between 16% and 27% depending on your credit score, and minimum payments around 2% of your balance or $25, whichever is larger.

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