What is Debt and Why is Too Much Debt Costly?

Debt is something, typically money, that is owed or due. Borrowing more money than you can afford is costly in many ways. According to the Federal Reserve, in April 2013 the average credit card debt equaled $3,364 per U.S. adult. If you paid just the minimum amount due ($67.28), it would take you over 19 years to pay off this debt. And you would pay a total of $7,618.64 over this time, that’s $4,254.63 more than you borrowed.

Taking on too much debt also lowers your credit score. That means you will end up paying higher interest rates on all your consumer and mortgage loans. A low credit score can also make it harder to rent an apartment, get utility services, and even get a job.

Too much debt isn't just expensive. People with lots of debt often say they lack peace of mind. They worry constantly about paying off debts and making ends meet. The stress of these worries affects their family life, work performance, and other areas of their lives.

The only way to reduce credit card debt is to make payments each and every month. To reduce this even faster you should pay more than the minimum payment each month.

Learn More:

 

Take the Pledge

I pledge to save money, reduce debt, and build wealth over time. I will encourage my family and friends to do the same

Take the America Saves Pledge

Tip of the Day

  • Have questions about how to file taxes in your 20’s? Here are 6 easy steps from #BetterMoneyHabits: http://bit.ly/2iH8ICq @AmericaSaves

Share Your Tip or Story

And if we feature you in our newsletter, you get $25.

Share

Saver Stories View all »

Challenging Herself to Save

It all started when Marchale Burton overheard Alabama cooperative extension colleague Isaac Chappelle, coordinator of Alabama Saves, explaining how saving just a little bit – even change – is all it takes to become a saver. “I thought about that,” Burton said, “and wanted to see if it would work.” So, she challenged herself to see how much change she could save.

Read more...

Getting Out of Debt

In 2004, Tonya Shelton was facing financial ruin. Barely making more than minimum wage and having lost her home to an unexpected family crisis, Shelton and her family were forced to live in a rundown hotel.

Read more...

Starting and Continuing a Personal Finance Journey

When Kiara Hardin, now a junior at Western Illinois University, became an intern with the Chicago Summer Business Institute during her sophomore year of high school, she began her personal finance journey. The program required participants to open a savings account.

Read more...

Receive Updates

Sign up for Texts

Sign Up

Sign up for Emails

Get Emails

Take the Pledge

Start Saving