Find out here the depressing length of time many Americans think it will take to pay off their credit card debt.
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Being in debt is stressful and expensive. You have to pay interest charges, worry about making the bills, and face the possibility of damaged credit if you can't pay on time. Becoming debt free is a goal for many who owe, but unfortunately, far too many Americans believe they'll never be able to escape debt's clutches.
In fact, a recent Northwestern Mutual study revealed that 13% of Americans believe they will be in debt for the rest of their lives -- while a 2017 study found that 73% of consumers still had debt when they died. Americans passing on owed an average of almost $62,000, which means that their estates would be responsible for paying creditors even after they’re gone.
Why is it so hard to become debt free?
For the 13% of Americans who feel they'll never get out of debt, there are likely many reasons why it may seem insurmountable to pay back what you owe.
Debt balances have reached record highs for student loan debt, credit card debt, and auto loan debt. Americans are borrowing more than they ever have before -- and wages aren't rising relative to inflation so purchasing power is shrinking even as Americans have more bills to pay.
As many as 80% of Americans live paycheck-to-paycheck, which makes finding extra money to pay off debt seem impossible. And more than 4 in 10 say they rely on their credit cards to give them a cushion to cover emergencies. So, even if you can find a way to start climbing out of debt, you'll probably end up right back in it if you hit a bump in the road.
Why is credit card debt so damaging to your finances?
Unfortunately, once you start the cycle of relying on credit cards to cover costs, it can be hard to ever get out of debt. That's because credit card interest is so high, so more of your money goes toward paying interest.
The average interest rate on credit cards is 17.07% as of October 2018. If you don't pay off your balance, your purchases are much more expensive thanks to the substantial amount of interest that you have to pay.
If you owed a balance of $8,000 on a card with a 17.07% interest rate and you made minimum monthly payments of 3% of the card's balance, you'd take 219 months to pay back what you owe. You'd end up paying a total of $14,945 back too, which is $6,945 more than you borrowed.
What can you do to get out of debt?
Once you're in debt, you should try to make a plan to get out of it as soon as possible. There are proven approaches to debt repayment, such as a debt snowball where you pay off your smallest debts first and a debt avalanche where you pay off your higher interest debts first.
Both approaches involve paying the minimum towards most debts, and then devoting extra cash either to aggressively paying off your lowest balance loans or aggressively paying your highest interest loans.
The more money you can put toward debt repayment, the faster you can become debt free and the easier it will be to start living within your means since you'll be sending less money in interest costs to creditors each month. In fact, you may want to consider working overtime or taking on a side hustle to generate extra cash to get aggressive in debt repayment. Taking proactive steps such as transferring credit card balances using a 0% balance transfer offer can also help your progress on paying down your debt.
It's important to stop digging a hole you're trying to get out of. That means committing to not take on any more debt. That's easier said than done, but if you live on a budget and build up at least a small emergency fund before devoting extra cash to debt repayment, it is doable for most.
Don't get stuck in debt for the rest of your life
If you're one of the millions of Americans worried you'll be in debt forever, or at risk of dying without ever paying off your debt, now is the time to take action.
You don't have to owe creditors for the rest of your life. Make a budget and a debt repayment plan today and get started on your journey to rid yourself of credit card debt and keep more of your money for yourself instead of wasting cash on interest forever.