Some Simple Math
I ran across this article this morning about credit card debt, and started trying to figure out what it meant in terms of numbers.
Nearly 80 percent of American families have at least one credit card, 44 percent of families carry a balance on their credit cards, and Americans pay about $15 billion a year in penalty fees, according to Treasury Secretary Tim Geithner’s office.
The current population in the US is around 305 million (2008 census). I don’t know how many families are in the US, but let’s take a rough stab and there are about three people per family, or around 100 million families. If 44% of those people typically carry a balance on their cards, then we’re left with about 44 million families that carry a balance on their credit cards monthly. So, if we take $15 billion dollars and spread that out over 44 million people, we get about $340 a year in interest charges per family.
Let’s say everyone put their $340 in a pot and called it a charity donation for the year of 2010, and that money became a life long income fund that made around 5% per year. That would mean that $15 billion dollars would generate around 750 million dollars a year. What could be done for 750 million dollars a year?
- You could feed about 11 million kids in Africa for the year [1]
- You could give health care coverage to 117,000 Americans [[2]](http://www.npr.org/templates/story/story.php?storyId=92419273)
- You could buy 75 million acres of rain forest and ensure it never gets destroyed [3]
$340 isn’t much of a vacation these days, but it’s definitely a weekend away in a nice bed & breakfast or something. I think the quote that sums up the article the best is this one:
“Debt is not a tool; it is a method to make banks wealthy, not you,” says Ramsey’s Web site, where users can find blunt advice on how to deal with creditors and develop sound money habits. “Debt is dumb.”
I understand that debt is a necessary evil sometimes though — I myself had to get around $40,000 worth of student loans to finance my education, and can’t even imagine how much interest I’ve paid in the mean time. That being said, I’ve been trying for the last year or so to pay off my credit cards in full whenever I purchase something (which I typically did anyways, but sometimes got lazy or forgot).