Avoid a Lifetime of Debt

Question: How long would it take someone to pay off a credit card by applying only the minimum amount due each month?

Answer: It all depends on the size of the balance you're carrying on the card and the card's minimum percentage due, but on average, it'll take about half a lifetime. Although many banks, including Citigroup (NYSE: C  ) and Bank of America (NYSE: BAC  ) , have raised their minimum payment requirements, it can still take a long time to get your card paid off. On a $10,000 balance, a minimum payment of 2% or $10, and an 18% interest rate, it'll take you over 55 years to pay it off, and you'll pay nearly $29,000 in interest. Even with a higher minimum of 4%, it'll still take you over 15 years to get free of debt. Yowza. That's a pretty powerful demonstration of how vital it is to pay down your balance as much as possible, as quickly as possible.

Think of credit card debt as the opposite of investing. Instead of earning, say, 10% on your money, someone else -- in this case, the credit card issuer -- is earning that money from you. (And credit card issuers aren't even content with 10% -- they frequently charge 15% to 30% or more in interest.) With credit card debt, you're digging a deeper and deeper hole instead of building a pile of wealth by investing in companies such as Rule Breakers pick aQuantive (Nasdaq: AQNT  ) , which recently has more than doubled since the beginning of the year after Microsoft (Nasdaq: MSFT  ) offered to buy out the company.

If you or someone you care about is mired in credit card debt, dig out from under. You can do it. Many Fools have done it. Learn more in our Credit Center. Our credit calculators are handy tools, too.

The following articles can also help you:

• Speaking Mathanese: The Annual Percentage Rate
• The Most Attractive Credit Cards
• When Lenders Compete, You Lose

You can also read about all things credit-related on our Consumer Credit/Credit Cards discussion board.

This article was originally written by Selena Maranjian and was last published on Sept. 15, 2005. It has been updated by Dan Caplinger, who doesn't own shares of the companies mentioned herein. Bank of America is an Income Investor pick. aQuantive is a Rule Breakers recommendation, while Microsoft is an Inside Value pick. The Fool's disclosure policy always gives you credit.