Decoding Debt: This Month’s Financial Focus

This month, we’re focusing on debt and the hidden costs that can stall your financial progress. To manage debt effectively, you must understand compound interest. While it builds wealth in a savings account, this “interest on interest” acts as a heavy anchor when attached to a balance you owe.

How much does it actually cost to carry debt? Let’s find out:

If you put a $1,000 purchase on a card with 20% interest and only make the minimum monthly payments, how much extra will you pay in interest alone by the time it’s paid off?

A. $100 (Total cost: $1,100)

B. $267 (Total cost: $1,267)

C. $661 (Total cost: $1,661)

Click here for the answer (and more on debt and compound interest).