Struggling with Over $200 Monthly in Credit Card Interest: Lessons Learned the Hard Way
Credit cards can be essential for building credit and helping those who live paycheck to paycheck, but they can also lead to significant debt that’s hard to escape.
Many people don’t pay attention to the fine print on credit cards, missing the actual interest rate. Others don’t understand how interest accrues or whether their payments are going towards the principal or just the interest.
Without a clear understanding of credit card terms, you might make regrettable decisions, as Devon Corra from Brooklyn, New York, discovered. Devon, who always considered herself financially responsible, got her first credit card at 19 without any formal financial literacy training. She knew a good credit score was important but didn’t fully grasp how credit cards worked. She initially used her card for essentials like food and gas, paying off the balance each month.
However, when she was out of work, she relied on credit to get by. Once employed again, inflation had surged, and her boyfriend’s commission-based job, along with raising his two kids, added financial strain. The cost of living made it hard to manage expenses, leading her to occasionally use her credit card for treats or personal items.
Over the past four years, her debt has spiraled out of control. She now has over $10,000 in debt across two credit cards. On the card with the higher debt, she pays $200 monthly in interest without reducing the principal. On the smaller card, her $90 monthly payments barely touch the principal.
Devon finds the concept of interest accrual confusing and only recently learned from a friend about the possibility of taking out a bank loan at a lower interest rate to pay off her credit card debt. She feels like she’ll never pay off her debt unless she gets a significant financial windfall.
Despite her efforts, paying off debt, like her car loan, surprisingly lowered her credit score. Additionally, her credit limit keeps increasing even though she carries balances.