There are “lots of reasons,” says Dr. David Aron, an associate professor of marketing at Dominican University who studies consumer psychology. “They include:
- People are more concerned with their own situations than those of others or the nation as a whole. My debt is my problem regardless of what national data says.
- It seems like so many things are more expensive these days (e.g., car repairs, medical expenses) and these bills have to be paid somehow, often through financing arrangements.
- Jobs are harder to find and transition more rapidly.
That's especially problematic because it takes around 10 years for someone with a $2,000 balance and a 15% interest rate to become debt free by only making their monthly minimum payment. And over those 10 years, that person will pay roughly $1,200 in interest.
That, in a nutshell, showcases the utility of a credit card calculator. Too often, people find themselves unable to see the forest (i.e. their overall goals of saving money and providing for a stable financial future) for the trees (i.e. what is convenient or seemingly appropriate at the moment). Most know that they should pay their credit card bills in full every month, for example, but they assume interest won't be that costly, or at least not worth as much as the purchases they'd like to make now. A credit card calculator, however, can easily translate guesswork into hard numbers, thereby pointing you toward the most cost-effective course of action.
The most strategic way to use credit card calculators is to make them integral to your credit card decision-making process. In other words, before making any significant decisions relating to your credit card use or spending, first crunch the numbers with the appropriate calculator. This will make it easier to pick the right credit card, evaluate the efficacy of taking on new debt versus waiting until you can pay in full, set goals and manage your finances accordingly, etc. For example, you could leverage a credit card interest calculator to determine if it's worth paying an annual fee in return for a lower APR, and a credit card debt calculator, also known as a payoff calculator, will give you a sense of whether a big-ticket purchase is worth it in light of how much time and money will be required for debt repayment.
“Decide how important it is to you to be debt-free,” says David M. Cordell, a clinical professor of finance and managerial economics at the University of Texas at Dallas. “Some people would say that mortgage rates are still so low that, given the likelihood of inflation, maximizing a fixed-rate mortgage makes sense. Not so for credit cards. The rates will always be high, and the interest isn’t tax-deductible. Commit to paying down those credit card bills and other consumer loans. Have a goal. If you want to be credit card debt-free in X years, use a calculator to figure out how much your payment will be. If you can do it, do it! If the pill is too big to swallow, try a longer period of time.”