The Math That Banks Don't Highlight
- Credit card trap: $5,000 at 22% APR with minimum payments = 22 years to pay off + $7,723 interest
- The $50 difference: Adding just $50/month to that card cuts payoff to 5 years, saves $5,500+
Debt Payoff Strategies
- Avalanche Method: Pay highest interest first—mathematically optimal, saves most money
- Snowball Method: Pay smallest balance first—quick wins build momentum (Dave Ramsey's favorite)
- Hybrid Approach: Start with one small win, then switch to avalanche for savings
- Balance Transfer: Move high-interest debt to 0% APR card (watch the 3-5% transfer fee)
Typical Interest Rates (US 2024)
- Credit cards: 20-29% APR (some store cards hit 30%+)
- Personal loans: 8-15% APR (depends on credit score)
- Auto loans: 5-12% APR (new cars get better rates)
- Student loans: 5-8% federal, 4-14% private
- Mortgages: 6-8% (historically low was 2.65% in Jan 2021)
Psychology of Debt Freedom
- Automate payments: Remove willpower from the equation entirely
- Celebrate milestones: Paid off a card? Treat yourself (reasonably!)
- Visualize progress: Track your debt-free date—watching it shrink motivates
- Tell someone: Accountability partners increase success rate by 65%
- Avoid new debt: Cut up cards or freeze them in ice (literally)
Extra Payment Hacks
- Round up: $267 payment? Make it $300—barely noticeable, big impact
- Biweekly payments: Pay half every 2 weeks = 13 full payments/year instead of 12
- Tax refund attack: Average US refund ($3,167) can eliminate a whole debt
- Side hustle rule: 100% of extra income to debt until free (then 50% to savings)
- Expense audit: Cancel 3 subscriptions = $30-50/month extra toward debt
Warning Signs You Need Help
- Only making minimum payments across all debts
- Using credit cards to pay other credit cards
- Debt-to-income ratio above 43% (mortgage lenders' red line)
- Missing payments or getting collection calls
- Consider: Nonprofit credit counseling (free!), not debt settlement scams