Can You Make 21% Interest on Your Money?

Troy Sharpe: I’m going to let you borrow $10,000. All you have to do is pay me back 21% interest at the end of the year, would you do that?

Hi, I’m Troy Sharpe, CEO of Oak Harvest Financial Group, CERTIFIED FINANCIAL PLANNER™ Professional (CFP®), and host of the Retirement Income Show.  If I asked my friends if they wanted to borrow $10,000, and all they had to do was pay me back 21% interest, in not such a nice language, they tell me to go get lost.  So many of us, that’s what we do with our credit cards.

The average household credit card debt in the United States is about $7,100 per household, the average interest rate is  21%. We’re going to go through three tips on how you can make 21% and what is the actual devastating destructive impact that carrying  this type of debt can do to your wealth. $10,000 at the average interest rate of 21%, if you wanted to pay it off in three years, you have a $377  monthly payment.

This means on the $10,000 principle, you’re going to pay $3,500 in interest, that’s $3,500  of interest on $10,000 that you borrowed, but yet you do this all the time. Maybe not you specifically, but we as consumers,  we have no problem going out and putting the credit card down and carrying balances. No one in their right mind, if their friends came to them and said, “Hey, I’m going to let you borrow this money,  you just have to give me 21%,” would do it, but yet we do it all the time because it’s a piece of plastic, and it’s a credit card.

Having debt with a credit card is extremely destructive  to your ability to build wealth. Three things that you need to do to make sure this doesn’t happen to you, one, never pay the minimum payment due. That minimum payment is designed  to keep you in debt so the banks can make as much interest off you as possible. Two, never spend more on a month than you know that you can pay off at the end of that month.

You  have to know your numbers to be able to do this, so check out my video on Know Your Numbers so you aren’t spending too much monthly that you come into a bind at the end of the month. Number three,  always, always pay that complete balance off on your credit cards at the end of the month. Now the only caveat to that one is if you’re trying to build credit, maybe  you’re going to apply for a mortgage or a car loan or something like that that’s important to your family.

You might want to keep a very, very small balance on those credit cards because that could potentially help  increase your credit score. If you have a $10,000 credit limit, you might want to keep maybe $400, $300, something like that on there, pay the interest,  and that could help your credit score. Make sure to subscribe to the channel, hit that little bell icon so we can keep you more connected to your money. Hit the thumbs up button, which likes the video, and of  course, share it with a friend or family member.