"“You can't be trusted to have debt. You don't have the behavior for it. You're not a credit card person,” Hammer told her after walking through her three maxed cards. His prescription was equally direct: “Close them. Take away the weapons that are harming you.”"
"“You literally spent more money than you put on it with the interest accruing, making the balance go up.” That is negative amortization in plain English. When your minimum payment is smaller than the monthly interest charge plus any new spending, the balance grows even when you are paying every month. A $13,000 balance throwing off roughly $4,000 in annual interest implies an effective rate near 30%. At that rate, paying $300 a month while still charging a $130 storage unit and six streaming subscriptions means the balance climbs while you feel like you are paying it down."
"“Close them. Take away the weapons that are harming you.” When the cards remain open, new spending and interest can keep the balance increasing. Cutting cards for symbolism is treated as insufficient compared with closing accounts to stop access and remove the mechanism that drives the interest spiral."
A debt situation with multiple maxed and over-limit credit cards can produce an interest spiral where monthly interest and new charges exceed minimum payments, causing balances to rise even while paying. One example involved a $13,000 Capital One Venture One balance with about $4,000 paid in interest in a year, alongside past-due and over-limit balances on other cards. The core problem is not just the amount owed but the behavior and access to ongoing spending through credit cards. Closing the accounts is presented as a direct way to remove the tools that keep the balance growing, rather than relying on symbolic actions like cutting cards.
Read at 24/7 Wall St.
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