Chapter 11Money Can Buy Happiness

Credit cards are expensive. According to, the average U.S. annual percentage rate (APR) charges on credit cards is 15.35 percent,1 but that’s down in recent years. During the financial crisis, some U.S.-based credit card APRs went as high as 39.6 percent2 as banks like Bank of America tried to compensate for increasing risk, or unwind high-risk credit that was being carried by the bank. In the United Kingdom, credit card rates hit a 13-year high in 2011, averaging out at 18.9 percent annually.3

The core problem with credit cards today for consumers is that they are fundamentally designed to encourage spending, in order to generate revenue for card companies and issuing banks. While debit cards are marginally better for consumers on an interest rate perspective, the lack of visibility on spend and overdraft fees means that in the United States the average consumer pays $225 in fees per year on a debit card/checking account4—and that includes all those “free” checking accounts, which are anything but.

According to and TransUnion research released in May 2013,5 the average credit card debt per U.S. adult (excluding zero-balance cards and store cards) is $4,878; on the basis of average APR this means interest costs in one year alone would cost a consumer well over $600 in interest—and that’s without paying down the card debt. Regardless of the construct, cards generally are expensive propositions for customers.

If you ...

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