Credit Card Debt Facts That Will Scare You Into Staying Out of Debt for LIFE



My financial turnaround began a little over a year ago. After reading some articles online about personal finance, I was persuaded to head to the local library to pick up some personal finance books.

It was the summer before my senior year and I was having one of those, “oh my god, I’m graduating in a year moments”. Life transitioning moments like a graduation, marriage, birth of a child, or purchase of a house are usually the sparks that lite the change in many people’s personal finance lives.

In hindsight, it was one of the best decisions I’ve ever made. As soon as I was finished with the first book – it was The Automatic Millionaire by David Bach – I was hooked. I wanted to tell everyone what I had learned and have them be as interested in personal finance as I was.

The trend I began to notice in the personal finance books I was reading was that every now and then certain facts, graphs, or insight would show up that would stop me in my tracks and overhaul the way I viewed money forever.

These moments are much more much life-changing than a friend or family memeber just saying, “hey, you should pay off your credit card debt.” They are moments of clarity, of education.

Today, we’ll dive into some of these facts of clarity when looking at information on credit card debt and how much paying the minimum is really costing you every month.

The True Cost of Paying the Minimum on a Credit Card

Many people assume paying the minimum on their credit card statement isn’t hurting them too much. Most people think of a credit card balance as a temporary problem that will eventually be handled. Everyone believes they’ll pay it off someday.

Even if you do pay off your credit card balance, the cost of keeping any balance on your credit card is astronomical. Credit cards offer interest rates around 15-19% which doesn’t seem terrible upon first glance.

This graph with hypothetical data paints a different picture and shows how much paying the minimum on your credit card really costs.

Debt: $3,000

APR: 19%

Minimum Monthly Payment: 2%

Time to Pay Off Debt 310 months or 26 years
Interest Paid $7,896
Debt Actually Costs $10,896

Paying the minimum is easy. It seems like progress is being made, but the truth is that only the credit card company is pocketing the money. When one is carrying a balance, a huge percentage of the payment goes towards paying the interest. The principal – the money you borrowed and needs to be paid off – is take care of after the credit card company gets there loan back. In the case above, this takes decades.

For example, the first month’s payment for the $3,000 worth of debt would look like this:

Month: 1

Min. Payment$60

Principal: $12

Interest: $48

Remaining Balance: $2,988

Total Interest Paid: $48

Only 20% of the payment is going towards the principal while a whopping 80% is going to the credit card company because they let you borrow their money.

To compare, this is what the last payment would look like:

Month: 310

Min. Payment$13



Remaining Balance$0

Total Interest Paid$7,986

Check out for a more detailed graph of these numbers.

These numbers are frightening and too many people never spend the time to figure out how much it really costs to finance an item on their credit card.

Paying the minimum can eventually lead to someone paying off their entire credit card balance, but it rarely does. The reason is that credit card debt continues to grow. The above graph is only true if the person with $3,000 worth of debt stops using the card altogether. However, if the card is active, it is often being used and the balance is increasing as the payments are made.

Unless the card is frozen or cut up, paying the minimum on the card will only have the credit card company getting richer with interest payments every month for a long time.

What hurts even more is the opportunity lost while this money was being paid to the credit card company in interest. That money could have been incurring interest in a savings account or in the stock market. Here is what that $10,896 could have possibly done invested – assuming an 8% historical market average return – instead of being locked up in credit card debt.


Invested as $419 per year for 26 years

8% Return

Returns $36,550!

These numbers help explain why so many people struggle with their credit card debt.

The numbers are almost possible to figure out in your head, and too many people assume the credit card company is looking out for them.

If you are buried under debt, check out some a budget calculator or credit card debt calculator at or These allow you to plug in your own numbers and figure out how long it will take to pay off your debt, and what you can do to accelerate your debt repayment.


Photo by JasonRogersFooDogGiraffeB ee

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  1. Matt Jabs says:

    Good stuff Austin.

    I recently shredded all my CC’s and closed them. I do still have one through my local credit union, but don’t use it. I’ll probably be closing that one soon too.

    I never plan to go in debt again or use a credit card again.

    Good post man.



    Austin Reply:

    Hey Matt, thanks for the comment and tweet. Credit cards are tricky and I wish you luck with your journey.

    However, I’m in Japan where cash is king and I have about 5 pounds of change on my desk every night, so I definitely miss the ease whenever I come home and dump out my pockets.

    I actually subscribed to your blog earlier today so I’ll be commenting over there soon. Take it easy, my friend.


  2. Mike says:

    Did you use correct mathmatics? $419 per month for 26 years is more than $36, 550 (and that’s no counting the 8% return!)


    Austin Reply:

    Mike –

    You’re totally right, but I accidentally put month when I meant $416 a year. I double checked the math and that comes out to around $36,000. Thanks for the heads up!


  3. The key piece of solving your debt crisis is to ensure you do not discount the condition completely. You must analyze the problem and resolve how to answer it. Talking to people with economic knowledge (be it family, a close friend, or even employees at the concerned credit card company), can bring about viable solutions. Timing is of the essence, so you must be fastidious; nevertheless taking the necessary steps to negotiate a settlement can sometimes be the advantageous decision.


  4. I’m waiting for Japanese Pension Refund and using a good chunk of it to pay off some ‘vacation’ credit card debt. The shame the shame.

    My plan in to get a couple of cards that give me lots of fun airline miles, pay off all my regular bills (apartment, gas, power, ect) with said cards, build up miles and take a trip that way.

    That or just cut up all my cards. Either or.


    Austin Reply:

    Awards based cards are great if you can find the right one. I have a 2% cashback Schwab credit card and I love it because everything’s on sale when you use it.

    Your pension must be pretty high after 4 years, right?


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