Is my $10,000 credit-card balance really so bad?

A. L. Katz  |  06:59 PM, Tuesday, June 1, 2010

Well, congratulations: You are the dream customer of credit-card companies. Their deal with you — you get to buy things you couldn't otherwise afford, they get a whopping 20 percent interest — is widely regarded as extortionary. As your friends are clearly aware, you are paying a surcharge (which is actually much more than 20 percent over time, given the laws of compound interest) on everything you buy and don't promptly pay off.

But if you're happy with this bargain, far be it from me to dissuade you. As long as you keep making your monthly payments and the balance you're carrying stays below 30% or so of your overall available credit, it shouldn't hurt your credit score too much. And I'll be the first to agree that credit cards are convenient, good for building a credit history, useful in emergencies, and, in a world of online purchases and credit-card-requiring car rentals, almost necessary. I bet even your friends don't think credit cards are inherently terrible.

Still, have you done the math on exactly how much you're paying? This credit card calculator can help you see how much interest you'll pay on the original debt — and over how many years — based on the payments you're making. When the time comes to wipe out that debt, even if you pay more than the minimum, you could end up paying almost $7,000 in interest charges. That, essentially, is the cost of instant gratification — and it's a lot.