Lets talk about credit card debt.

I got a sheet in college about credit card debt with a few examples, to get “us” college kids to start thinking about finances and money. It was a real eye opener and I have never gotten rid of this piece of paper, so I can look at it every so often and try to not buy anything on credit cards anymore.

Say you owe $1,500 on your credit card and pay the $25 a month min on time all the time. How long would that take you to pay off at that rate? How much more would you end up paying in interest charges?

If you had a 10.8% interest rate (yea right what college student gets that kind of rate?) It would take 7.3 years to pay it all off with a total cost of $2,300!!!!!

If you had a 13.8% interest rate (again, yea right what college student gets that kind of rate?) It would take 8.5 years to pay it all off with a total cost of $2,700!!!!!

If you had a 16.8% interest rate (still not a normal rate) It would take 11.0 years to pay it all off with a total cost of $3,500!!!!!

If you had a 19.8% interest rate (yea this is more where I was at back then and I notice more CC are going to now.) It would take 23.5 years to pay it all off with a total cost of $7,800!!!!!

If you had a 22.8% interest rate (this is where most of the younger generation would be) It would NEVER get paid off!

Did you ever imagine that? I sure didn’t. It also says that a “general rule of thumb” is that your monthly payments on your debt should amount to no more then 20% of your income. Debt in this case would be cars, appliances, furniture, credit cards, bank loans and student loans.

So that was scary and quite honestly depressing for me. But its good to know. Stop buying on credit unless you pay it off every month. And always pay more then the min due, even if it’s a few dollars. We have started paying every week a ¼ of our monthly payments and have seen a huge improvement in just under 4 months. By paying weekly or bi-weekly you are cutting down on the amount of interest you accrue.