In just the year 2022, the Consumer Financial Protection Bureau highlighted that credit card companies charged consumers over $105 billion in interest. Fast forward to February 2024, and the CFPB noted that increasing interest rates are adding an extra burden of $25 billion annually on consumers.
The average Annual Percentage Rate (APR) now exceeds 20%—nearly ten times what banks offer on savings account interest. Card companies bank on the fact that more than half of all cardholders carry a balance, effectively making this a vast, perpetual money machine for issuers.
Should you miss a payment, be prepared for the consequences. Penalty APRs can surge to nearly 30%, which makes climbing out of debt even more challenging. The system is structured to keep you ensnared unless you equip yourself to outsmart them.
It’s a clever tactic from their standpoint. They offer just enough credit to encourage spending but not enough for easy repayment. Minimum payments are set to be just manageable, yet sufficient to keep you on the hook for years.
Consider this: a $3,000 balance at a 22% APR with only minimum payments could take over 19 years to pay off. In that period, you’d end up paying more in interest than the original purchase price itself.
