We are on the brink of crossing $1 trillion in total credit card debt in the US. This type of debt is terrible. It has cripplingly high interest rates and it typically compounds daily (yes, you read that right: DAILY).
Credit card debt has been going up partially because of inflation (prices are higher, so people borrow more to be able to buy things). But it’s been going up at an even faster rate than inflation. Meaning more people are spending more than they make for one reason or another.
About 104 million Americans are estimated to have credit card debt currently. Middle aged people carry the highest balance, which might be surprising since the younger generation usually has the worst reputation for being financially reckless.
Regardless of your age or background, no one intends to wind up with a big credit card balance. It can creep up on you, whether it’s from a big unexpected expense or a gradual progression of lifestyle inflation that you can’t afford. And once you begin to accumulate it, the debt can explode in size if you don’t catch it right away and focus all your efforts on squashing it.
Here’s a PFC rule: Never pay credit card interest. Period. If you use a credit card, treat it like a debit card and pay off the balance IN FULL every month. If you can’t afford to pay it off in full, don’t buy it. Work extra hours, pick up a second job, get a roommate, buy something cheaper, sell stuff you’re not using, whatever. Don’t take the easy way out and start racking up credit card debt because it will come back to haunt you years later, then you’ll have to do all that uncomfortable stuff and more.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Vivi & Shane
