Why credit card debt is a bad idea

Say a consumer has $10,000 of credit-card debt with a 20% interest rate and the minimum payment is calculated by taking 2.5% of the average daily balance. It will take more than 50 years to pay off the balance with just the minimum payments — if no further debt is added — and cost nearly $20,000 in interest charges, according to City National Bank’s online calculator. That doesn’t include additional spending, fees for late payments, potential interest-rate hikes or other charges the consumer may incur.

Credit card debt has been soaring, no doubt at least partly due to the HELOC money machine getting turned off for many. Loaning money to those who may not be able to repay has been hugely profitable, so far, for credit card companies. But haven’t we heard and seen this all before with subprime? The credit card bubble will burst too.

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