How one mom avoided financial reality as credit card debt piled up

Jenny Bauman never ran the numbers to try to calculate just how much her credit card debt would end up costing her at frighteningly high interest rates of nearly 30% a year.

And she had absolutely no idea how long she'd be buried in debt if she kept making only minimum monthly payments, which, thankfully, is no longer a cause for concern on her financial horizon.

"I like living in a bubble," Bauman said warmly.

On the plus side of the ledger, Bauman, 45, locked in a 3.75% mortgage on her home in Warren, where she raises her 7-year-old son, before inflation skyrocketed. She has a well-paying job that involves leveraging technology to enhance training in the workplace.

Yet her money woes kept building, thanks to an extraordinary level of student loans, assorted spending sprees, a catastrophic cycle of payday loans, and $13,000 on eight credit cards at an average rate of 29%, credit card debt that could only climb higher as she made minimum payments, sometimes late.

She'd always told herself: "I'll be fine, I'll be fine. I don't need to worry about this."

"I never did the math, which I think would cause a panic attack if I did."

How long would it take to pay off a credit card

Doing the math would trigger high anxiety for anyone.

The numbers show that it would take someone 306 months — or a bit more than 25 years — to pay off $13,000 in credit card debt if the consumer only made minimum payments each month on credit card debt when the annual percentage rate is 30%, according to Ted Rossman, senior industry analyst for CreditCards.com and Bankrate.com.

How much would the interest drag you down? Brace yourself. Here's where a 30% rate on credit cards gets ugly.

The consumer in this example would accumulate $30,776 in interest — well more than two times the cost of what you bought.

Rossman noted that different credit card issuers will calculate their required minimum payments in various ways. He used a minimum payment formula of 1% of the balance plus interest each month, with a floor of $35 a month.

During the first year, based on his example, the minimum payments would be in the $400 to $450 a month range.

Monthly payments would gradually drop as the debt was paid off. Yet, it would take roughly 12 years to get those minimum payments down to $100 a month and lower. The example uses a $35 minimum payment as a floor for the lowest the minimum would go in the final years.

Jenny Bauman, 45, of Warren, has been paying down her credit card debt for the past year through a debt management program at the nonprofit GreenPath Financial Wellness. She had been looking at annual interest rates of nearly 30% on her credit card debt.
Jenny Bauman, 45, of Warren, has been paying down her credit card debt for the past year through a debt management program at the nonprofit GreenPath Financial Wellness. She had been looking at annual interest rates of nearly 30% on her credit card debt.

Many people who are burdened by high interest rates and old bills, according to financial counselors, never do the math. They don't want the black and white to spell out how deeply they're in the red.