"The mathematics of minimum payments reveal the true danger. Recent analysis shows how a typical balance at standard interest rates can keep borrowers trapped for over a decade, with interest charges nearly doubling what they originally spent. This compound interest effect is precisely what makes the debt cycle so difficult to break. The industry's business model depends on consumers carrying balances."
"The debt crisis has intensified as cardholders struggle under the weight of growing balances. The typical American now owes nearly $8,000 on their cards, and with interest rates exceeding 22%, that debt compounds rapidly. What starts as manageable monthly charges transforms into a multi-year trap when borrowers can only afford minimum payments, illustrating exactly the cycle Ramsey warns against. Payment processors like Visa and Mastercard achieve profit margins near 50%, while card issuers extract returns above 20% from interest and fees."
Americans carry $1.233 trillion in credit card debt while average interest rates exceed 22%. The typical cardholder owes nearly $8,000, and interest compounds rapidly when balances are not paid in full. Relying on minimum payments can keep borrowers trapped for over a decade and can nearly double interest charges relative to original spending. Payment processors and card issuers earn high profit margins from revolving balances, shifting costs to consumers. Credit cards are not inherently harmful when balances are paid monthly in full; paying in full avoids interest, earns rewards, and builds credit history.
Read at 24/7 Wall St.
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