credit card debt
Outstanding balances on credit card accounts subject to high revolving interest rates, often the most expensive consumer debt.
Example
“Americans collectively owe over $1 trillion in credit card debt — averaging over 20% APR on balances carried.”
Memory Tip
CREDIT CARD DEBT = most expensive consumer debt. 20-30% APR. Pay it off first.
Why It Matters
Credit card debt matters because it typically carries interest rates of 15-25% or higher, making it significantly more expensive than other types of borrowing like mortgages or car loans. Understanding how credit card debt works is essential for building good financial habits and avoiding a cycle of debt that can damage your credit score and financial future.
Common Misconception
Many people believe that paying only the minimum payment on their credit card is acceptable, but this is misleading because the minimum payment barely covers interest charges and leaves most of the principal balance untouched. This misconception keeps people trapped in debt for years while interest accumulates and they pay far more than the original purchase price.
In Practice
Imagine you charge 5000 dollars to a credit card with a 20% annual interest rate and only make minimum payments of 100 dollars per month. After one year, you will have paid 1200 dollars but still owe around 4200 dollars because most of your payments went toward interest rather than reducing your balance.
Etymology
CREDIT CARD (revolving credit instrument) DEBT (money owed). DEBT accumulated on CREDIT CARDS.
Common Misspellings
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Related Terms
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