Question

Explain how it is that many Americans find themselves swimming in credit card debt, unable to pay down their

Answer 1

Answer:

People use their card for a purchase they can’t afford or want to defer payment, and then they make only the minimum payment that month. Soon, they are in the habit of using their card to purchase things beyond their budget. Since they are making only the minimum monthly payment, it won’t seem to matter much if their credit card balance gets a bit larger. This is a quick illustration to show how their “small balance” of just a few thousand dollars can really mean paying more than double that amount over the years because of interest. Also, when they are trapped in this mindset, their balance barely budges. With a debt of $5,000 and a minimum monthly payment of $150 (at 3% of the total balance), they will only be paying $47.30 each month toward their principal. The rest goes toward their interest accrued.