According to a recent LendingTree survey, 41% of US credit cardholders only pay the minimum amount on at least one of their credit cards, with this percentage rising to 58% among Gen Z consumers. The survey of more than 1,500 cardholders revealed that a US cardholder with debt carries a $7,756 balance. As reported by Mint, this pattern creates what experts describe as a recipe for staying mired in debt.
With the average Annual Percentage Rate (APR) on current cards at 20.94%, borrowers face significant financial consequences. According to the survey findings, a cardholder with a $7,756 balance will continue to remain indebted for nearly 27 years and pay approximately $13,000 in interest over this period. This prolonged repayment cycle becomes increasingly difficult to escape as interest accumulates month after month.
The survey data reveals significant generational differences in credit card debt management. As reported by Mint, the 19% minimum payment rate among Baby Boomers stands in stark contrast to the 58% rate among Gen Z consumers. This generational divide suggests that younger consumers may be more likely to fall into debt traps due to different spending and repayment habits compared to older generations.
According to Mint's analysis, the primary purpose of credit cards should typically serve as a tool to afford expenses in view of future income, with the expectation of repaying the balance in full each month when salary arrives. The report emphasizes that paying only minimum amounts creates a cycle where interest accumulation becomes a cost addition and stretches repayment timelines, making it increasingly difficult to meaningfully reduce the overall balance over time.
In India, credit card debt can be equally challenging, with SBI Card currently listing finance charges of up to 3.75% per month, or 45% per annum on many unsecured cards. As demonstrated in a simplified example, if a cardholder has a ₹1 lakh outstanding with a monthly finance charge of 3.75% and pays only ₹5,000 monthly, the debt would remain close to ₹99,425 after accounting for interest and GST. Under these assumptions, a fixed ₹5,000 monthly payment could take roughly four years to clear the balance, with the total amount paid potentially reaching ₹2.5 lakh.
