Credit debt may cost more than consumers think

A new report suggests carrying even a little credit card debt could be costing consumers big money over time.

The average American carries over $5,000 in debt, however with lost savings, reduced purchasing power and high interest rates, this extra spending is enough to cut into that next big purchase or retirement and college funds.

The average interest rate on a credit card is 16.75 percent, with most companies using an average compounding daily balance method, according to the San Francisco Chornicle. This debt is charged an interest rate by the day over the life of the debt.

An average debt compounded by an average interest rate could lead to an additional $2.34 in interest per day, the news source reports. Or about the cost of an extra cup of coffee. Over the month this could add up to as much as $70 of extra spending.

Multiplying this digit by 25 years, or the life of the average minimum loan payment, consumers could face up to $20,000 in interest costs over the course of a loan, according to the Chronicle.

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