Grant Montgomery
Grant's Rants on the Economic Crisis


How buying on credit gets you

The cold, hard truth is that most in the western world are debt slaves, trapped in an endless cycle of debt that we never escape until we die, and meanwhile our years of hard labor are greatly enriching those that own our debts.

Many of us find out too late what it means to be a slave to debt. Most of us were never taught how expensive it is to buy on credit.

Consider the following example about credit card debt from a former Goldman Sachs banker: “On the debt side of things, how much does your credit card company earn if you carry just an average of a $5,000 credit card balance, paying, say, 22% annual interest rate (compounding monthly) for the next 10 years?

"In your mind you owe a balance of only $5,000, which is not a huge amount, especially for someone gainfully employed.  After all, $5,000 is just a quick Disney trip, or a moderately priced ski-trip, or that week in Hawaii.  You think to yourself, ‘how bad could it be?’ …

“The answer, including the cost of monthly compounding, is $44,235, or about 9 times what it appears to cost you at face value!”


To take another example, let’s think of compound interest on credit cards for the average American household.

Let’s say you are a household which carries the average American balance of $15,956 in credit card debt. And as an average American household, let’s also assume you pay an average current rate of 12.83%. Finally, let’s assume you carry this average balance for 40 years, between ages 25 and 65. 

How much did your credit card company make off of you and your extreme averageness?

Answer: An incredible $2,629,618.64! 


Sadly, approximately 46% of all Americans carry a credit card balance from month to month, replicating the above formulas.

Grant  Montgomery Grant's Rants on Buying on Credit