According to a survey conducted by the Harris Poll as commissioned by the online website, Nerd Wallet, U.S. household debt increased to an all-time high of $13.95 trillion at the end of 2019. This debt includes mortgages, home equity lines of credit, automobile loans, student loans, credit cards, and other household debt. The average U.S. household with revolving credit card debt has an estimated average balance of $6,849 and pays annual interest of over $1,100. So how long does it take to pay off this average balance if making only the card’s minimum monthly payments of $20 per month at a prevailing annual percentage rate (APR) of 19%? If you compute this answer on a financial function calculator, a "no solution" is found, meaning that the number of monthly payments is so large that you will never get out of debt!
Even with a relatively modest average credit card balance of $1,000, it will take the borrower almost 100 months or 8.33 years to pay off the card. And the 19% APR is the rate charged for a borrower with a good credit score; those with a poor score pay an even higher rate, sometimes exceeding 30%!
Therefore, it is critical that a good consumer and investor properly manage debt. Accordingly, here are some good rules of debt management to follow: