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Americans spend $250 billion a year on credit card interest. That is one quarter of the trillion dollars spent annually on the national debt. Both are a considerable waste of money and will likely lead to not so good outcomes.
Why do people use credit cards as they do? Some claim it is necessary for living expenses, some just overspend, some may be subject to various pressures like keeping up with the Jones’s, still others make no provision for emergency funds and get trapped in debt.
I think it can be summarized in most cases as poor financial planning and irresponsible behavior. In any case, those interest payments are taking from their future.
It’s certainly a staggering amount of interest. I recently read that around 60% of credit card accounts carry revolving debt rather than being paid off in full each month. I’ve often thought the very low minimum payments are part of what sucks people into credit card debt in the first place—if someone got their first credit card knowing upfront that the minimum payment would be 20 or 25 percent of the balance, they’d likely think twice before running up a large balance to begin with.
Can you estimate the number of people who pay this interest, and of them, how many pay interest for a short term before retiring the debt versus the number who have chronic credit card debt and who make regular monthly interest payments for years?