How Much is your Credit Card Debt Really Costing You?
Credit card debt in the United States is at all-time highs, with almost $1.05 Trillion1 in outstanding balances and average interest rates of 21.59%2. To put these numbers into perspective, let’s assume that you have $40,000 in credit card debt at the national average rate of 21.59% APR. How much would you have to pay monthly to satisfy this debt in 1, 5, 10, or 20 years? How much interest will you have paid the bank over those time periods? Below, we have calculated those values and the answers may surprise you:
How else could you spend these funds if they weren’t allocated towards interest payments?
- The $4,831 in interest you would pay over 1 year could pay for a 5-day, all-inclusive trip to Disney World with theme parks for a family of 5.
- The $25,727 in interest you would pay over 5 years could pay for a brand new 2024 Toyota Corolla.
- The $57,878 in interest you would pay over 10 years could pay for 4 years of in-state tuition at Virginia Tech.
- The $135,145 in interest you would pay over 20 years could cover a 20% down payment for a $675k house in retirement.
As you can see, the interest payments associated with carrying a credit card balance can be detrimental to your overall financial picture and cause you to miss out on much better uses of your hard-earned money. The key is to recognize and then confront high-interest debt as a serious problem. If you need a partner to help address and tackle your high-interest debt, our team at Wolf Group Capital Advisors is trained with the tools necessary to re-orient your financial trajectory toward financial freedom.
Sincerely,
Andrew Gary
Financial Advisor
1Board of Governors of the Federal Reserve System (US), Consumer Loans: Credit Cards and Other Revolving Plans, All Commercial Banks [CCLACBW027SBOG], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CCLACBW027SBOG, May 21, 2024.
2Board of Governors of the Federal Reserve System (US), Commercial Bank Interest Rate on Credit Card Plans, All Accounts [TERMCBCCALLNS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/TERMCBCCALLNS, May 23, 2024.
Learn more about Andrew Gary here, and our financial planning process here.
About Wolf Group Capital Advisors
At Wolf Group Capital Advisors, a comprehensive wealth management firm and Registered Investment Advisor (RIA) based in the Washington, D.C. metropolitan area, nothing is more important than the fiduciary responsibility we have in managing your wealth. Taking the utmost care, we focus on providing advice tailored to your specific circumstances. With more than two decades advising U.S. expatriates and non-US citizens employed by international organizations, we are qualified in investment strategies addressing global issues. Empathy and curiosity—combined with our experience in life planning and investment management—enable you to explore a wider set of possibilities that can lead to a fulfilling life you’ve worked hard to attain.
Disclosure:
The views expressed represent the opinions of Wolf Group Capital Advisors as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.
Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website. www.adviserinfo.sec.gov. Past performance is not a guarantee of future results.