Credit cards can be expensive, but if you want to save on the cost of a card, you should be prepared to pay off the balance in full within three to six years, according to a recent study.
The researchers from Cornell University found that people who paid off their credit card debt in full after a two-year period with no delinquencies had a 62% chance of being able to pay it off by the time they turn 65.
They found that those who paid their debt off before the age of 65 had a 70% chance, while those who didn’t pay their debt at all had a 71% chance.
That’s a lot better than the 65% chance that people with no credit card delinquencies have after paying off their debt, the researchers said in a report published Monday.
Credit card debt is often the first thing people think of when they hear the word “debt,” according to the Cornell researchers.
But when you’re dealing with $100,000 or more in credit card balances, it can be a daunting prospect.
“It’s a little scary to get a credit report,” said Elizabeth Pinto, a senior economist at the Center for Responsible Lending, a credit reporting company that helped compile the Cornell study.
“And when it comes to credit card accounts, you’re probably going to want to be prepared with a lot of cash.
So it’s not something that you’re going to see very often.”
When you’re in the midst of a recession or an economic slowdown, people with credit card bills are often struggling to keep up with their credit obligations, Pinto said.
“You’re paying $20,000 a month in interest,” she said.
“If you have a credit score of 620, that’s $70 a month, but the interest is going to be $20 a month.
You’re paying that off every month, and then you’re still going to have to pay the balance off every two years, which is not a great situation.”
The Cornell study found that the average age for a consumer to pay back their credit cards is now about 58.
“There are probably a lot more people who are younger than the average person that have the ability to pay those balances off,” Pinto explained.
“When people look at it, you really have to ask yourself, why do I need to pay $20 per month?” she added.
“It’s really easy to take on that debt, and when you do, it’s really hard to pay down it.”
The study, which was conducted by researchers at Cornell University and the National Center for Credit and Consumer Information, was based on data from the Federal Trade Commission’s Consumer Financial Protection Bureau.