$6k credit card average
What is debt?
Debt is money you owe to a lender, with a legal obligation to repay it with interest. Not all debt is equal: mortgage debt builds equity; education debt can increase earnings; credit card debt at 18–29% APR depletes wealth rapidly. The average American household carries $104,000 in total debt. Your debt-to-income ratio (monthly debt payments ÷ gross monthly income) should stay below 36% to remain financially healthy.
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Try calculatorKey takeaways
04 · ideas- Debt is borrowed money you must repay with interest — a real financial cost
- Good debt builds wealth (mortgage, education); bad debt depletes it (credit cards)
- At 20% APR, $6,000 in credit card debt costs $1,200/year in interest alone
- Debt-to-income ratio above 43% makes it hard to qualify for major loans
Illustrative chart
$200k · 7.5% · 30yr
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Debt is money you owe. When you borrow money, you create a debt — a legal obligation to repay the principal plus interest.
Not all debt is the same. Financial experts often distinguish:
"Good" debt — borrowing that can build wealth or increase earnings:- Mortgage: builds equity, historically appreciates
- Student loans: can increase lifetime earnings
- Business loan: can generate profit exceeding the cost
- Credit cards at 18–29% APR
- Payday loans at 300%+ APR
- Car loans for vehicles that depreciate immediately
- Buy-now-pay-later with high deferred interest
Average credit card debt: $6,000 at 20% APR
- Annual interest: $1,200
- At minimum payments: takes 17+ years to pay off, costs $8,000+ in interest
- Total cost: $14,000+ on $6,000 borrowed