It is true that credit card debt, particularly debt on credit cards carrying a high interest rate, can be expensive when the balance mounts up. Surprisingly, though, striving to quickly pay off the balance on such cards is not necessarily a good idea under all circumstances.
The statistics show that the average debt on a credit card in the U.S. today, including New York, with the exception of cards having no balance and various store cards, is $4,878. The average card has an annual percentage rate on interest of 12.76 percent. Just paying interest alone for a period of twelve months would cost more than $600.
The problem is that if you just pay it off at great sacrifice without figuring out the underlying problem that gets you into debt in the first place, the debt can quickly come back. So if you want to get ahead, one thing to do is to try to stop using your credit cards for a while if you can afford to do so. Try to pay cash.
Most importantly, try to analyze your finances and see where it is your money goes every month. Are you spending more than you are taking in? Are your reoccurring expenses too high? A realistic strategy might be to aim at gradually reducing your credit card debt. Paying it off all at once might leave you stretched too thin and actually compel you to go back into debt again just for necessary purchases.
In some cases, the solution may be a Chapter 7 bankruptcy to discharge the debt, and get a fresh start in life. There may be pros and cons to this solution in your particular circumstances. It is usually advisable to sit down with an experienced attorney, and learn more about your options.
Source: Forbes, “When Not To Pay Off Your High-Interest Credit Card Debt” Nancy Anderson, Oct. 11, 2013