While consumers have been making strides to pay down debt recently, many are still struggling with overdue credit card payments.
A new report by MSNBC indicates this may be due to the fact that many Americans simply make minimum monthly payments on their credit card debt.
The average American currently holds nearly $4,000 in credit card debt, a figure which could blossom by $700 annually if consumers continue this strategy, MSNBC reports. This is due in part to the fact that the average interest rate on these funds can be as high as 15 percent.
However, consumers who take the time to understand their monthly payments, and pay down debt on cards with higher interest rates their top priority could benefit, the news source says. By increasing this minimum, which typically only accounts for 2 to 5 percent of the total, cardholders could eliminate debt more quickly.
In addition, they are likely to find the benefits directly in their savings accounts as this would also help them save money on interest that has now been eliminated.
Towards the end of 2010, many consumers had adopted this policy, particularly with mortgage payments.