Debt can be overwhelming. High-interest credit card debt is one of the most expensive financial traps out there. I recently met with someone who found themselves stuck in this cycle. Their story highlights an all-too-common problem and serves as a cautionary tale, but also as a beacon of hope for those looking to break free.

The Story,

The individual owed $16K on credit cards, with an interest rate of 20%. Each month, they diligently paid $300, thinking they were making progress. But the harsh reality is that out of that $300 payment, only $60 went toward reducing the balance. The other $240 was swallowed by interest. Over the course of a year, they paid down just $720 of their debt, but paid a whopping $3,600 in interest, directly to the credit card company.

Let that sink in…. The credit card company was the clear winner here, pocketing thousands of dollars, while the individual’s debt barely budged.

Why it happens,

Credit card interest compounds against you. When you carry a balance, the interest doesn’t just apply to your original debt but also to the interest that accrues each month. This is why paying only the minimum, or small amount above, often feels like running on a treadmill—a lot of effort with little progress.

The Insight,

Here are some steps you can take to regain control:

1. Assess Your Financial Situation
   • Write down all your debts, interest rates, and minimum payments.
   • Understand where your money is going each month.
2. Prioritize High-Interest Debt
   • Use the debt avalanche method: focus on paying off the debt with the highest interest rate first while making minimum payments on others.
   • Alternatively, the debt snowball method—paying off small balances first—can provide psychological wins to keep you motivated.
3. Negotiate Lower Interest Rates
   • Call your credit card company and ask for a lower interest rate. It doesn’t always work, but it’s worth trying.
4. Consolidate Your Debt
   • Consider a personal loan with a lower interest rate or a balance transfer card with a 0% introductory rate. These options can help you pay down the principal faster.
5. Increase Your Payments
   • Even an extra $50 or $100 a month can make a big difference in reducing your balance and saving on interest.

The Path forward,

The person I met felt hopeless, but by chatting with me & implementing some of these strategies, they started to see progress. Slowly but surely, the treadmill started to move forward.

If you’re facing high-interest debt, the situation may feel daunting, but it’s not insurmountable. Take small, consistent steps, and over time, you can turn the tide. The key is to act now and break free from the cycle of compounding interest working against you.

Who will win in your financial story? Let it be YOU!