How to Dig Out of Debt
I got a press release today with the headline "Consumer Debt Decreases in July," which seemed encouraging until I took a closer look at the numbers. Unfortunately, the decrease is pretty small and the average credit-card debt still is pretty large. According to Credit Karma's U.S. Credit Score Climate Report, the average credit-card balance dropped just $120 in July to $6,818. With most issuers requiring cardholders to pay 4% of their balance each month, that $120 isn't even half of what a monthly minimum payment would be on a $6,818 balance.
A cardholder paying only the minimum ($272.72) on that balance would take more than 12 years to pay off the debt and pay nearly $4,000 in interest (see our What's the True Cost of Paying the Minimum calculator). If you're only paying the minimum, it's an early warning sign of credit trouble. Now would be a good time to make some changes in your spending habits or get help from a credit-counseling agency.
For advice on digging out of debt, see the stories and video below: