Approximately half of Americans have a credit card balance for more than two years with an average revolving debt of $,600. However, not paying off your balance and carrying the balance can increase the balance due to high interest rates, more than offer some online loan company’s websites.
NerdWallet is a personal finance site that laid out what a credit card debt of $6,000 with a 14.99 percent interest rate.
- Pay only the minimum; you pay more than $4,000 in interest in 14 years’ time
- Pay two times the minimum amount; you pay just over $1,500 in interest in 5.5 years’ time
- Pay the minimum amount as well as an additional $100, and the interest is around $1,400 in 3.5 years’ time.
As you see, the best thing you can do is pay off the debt each month in full. However, if you’re in debt, there are two ways to address it:
- Avalanche method – This method deals with high-interest rates credit cards first.
- Snowball method – This method deals with the smallest debt first, paying it off and then putting that minimum amount toward another debt.
Which method is best is dependent upon your own situation.
After you become debt-free, you should start doing what you can to pay your debt off in full. This saves you thousands of dollars in interest, which gives you a better return than any investment.