A High Average APR

Posted by: Sophie H. | Nov 04,2007


A recent study has shown that the average APR for credit cardholders is 20%.  This is far higher than I would have assumed.  I think this is more of an alarming figure than the fact that most people have a debt of $13,000 in debt, as determined by the same study.  Everybody’s going to be carrying around some amount of credit card debt.  It’s the name of the game.  But if you’re also carrying around a 20% APR on that debt, you’re treading in very difficult waters.  

For most people, their income does not increase dramatically.  Over time, they may get a raise, but in that time they’ve also likely added to their credit card debt, so they will not necessarily make huge headway even if they put down more for credit card payments every week.  Everyone dreams of some kind of financial windfall to pay off credit card debts.  Short of going on “Deal or No Deal” and making a million or winning the lottery, this just isn’t going to happen.  

This cycle of debt is especially problematic for retirees.  For retirees, their income is being cut off entirely.  Social Security will make up some of it, but savings and investments have to make up the rest.  If you have a 20% APR on one or more cards, you’ve got to subtract tens of thousands of dollars on an average $13,000 debt – because over time, this is how much you’ll be paying to pay off the base balance. And for many retirees, $13,000 is actually on the low end of what they’re looking at in credit card debt, nevermind other types of debts as well.  

If you are in this very common scenario, you’ve got to be aggressive about paying off debts now.  A balance transfer plan is one useful option.  For one full year – the time of a standard 0% APR balance transfer plan – you should look to pay off that debt in full without adding any additional balance to that card.  In the long run this could save you thousands of dollars in interest payments.  Money you don’t spend on interest is the same thing as money in the bank, so avoiding interest is very much a part of overall retirement savings.  

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