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

  • Let @AmericaSaves help you stay committed to your tax time #savings goal! Take the pledge today: http://bit.ly/2hbdQ46

Share Your Tip or Story

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

Share

Saver Stories View all »

Developing a Savings "Game Plan"

Eunice Diaz, a teacher in Colorado Springs, had been noticing a pattern. Despite the fact that she and her husband were “making good money,” they were spending their entire earnings and “were still struggling at the end of the month.”

Read more...

Learning to Save

Kisha Barns’s financial situation was undisciplined, unrestricted, and impulsive before she came into contact with her local America Saves campaign, Charlotte Saves.

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...

Receive Updates

Sign up for Texts

Sign Up

Sign up for Emails

Get Emails

Take the Pledge

Start Saving