Some deals really are too good to be true. For example, buying something on credit or with a buy now, pay later program can seem like a great deal. But sometimes, if that debt piles up, it could mean bad news for your finances.
Read Next: 6 Ways To Lower Your Student Loan Debt Interest Rate
Learn More: 10 Used Cars That Will Last Longer Than an Average New Vehicle
Here are four debt traps to take a closer look at before you fall into a negative cycle.
Credit Card Minimum Payments
Paying only your credit card’s monthly minimum payment is a sure way to keep your debt going up long term. While you might feel like you’re keeping — or saving — money in your account, interest rates and fees mean that your debt will last much longer and your finances could suffer.
The USAA Educational Foundation provided an example to show how paying more than the minimum payment can save you money over the long term. If you had $3,000 in credit card debt at an 18% interest rate, it would take 22 years to pay it off making just minimum payments, and you’d pay $9,328 in total. However, if you paid an extra $20 a month, it’d take under eight years to pay it off, and you’d spend $5,186.
Find Out: Do Your Student Loans Affect Your Credit?
High-Interest Loans
A high-interest loan may get you out of one emergency and into another disaster. From exorbitant interest rates to short repayment terms, high-interest loans can make payback difficult. Borrowers may have to take on new loans to pay off old ones, which can continue the cycle of debt.
Buy Now, Pay Later
In 2024, 15% of American adults had used a “buy now, pay later” financing option in the previous 12 months, according to the Federal Reserve.
The ease of this type of payment, especially seen in online shopping, can quickly lead to overspending and debt. Missed payments can also lead to additional fees and potentially impact your credit score under new laws.
Student Loan Fine Details
Millions of Americans have student loans, but some might not understand what they entail. Make sure you understand your type of student loans and repayment terms. Take out only what you need (and not more) so you can avoid a higher monthly payment, if at all possible.
Also, keep in mind the impact of forbearance in the long run, as your debt can increase over time due to accruing interest.
More From GOBankingRates
- 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025
- 4 Things You Should Do if You Want To Retire Early
- Mark Cuban Tells Americans To Stock Up on Consumables as Trump's Tariffs Hit -- Here's What To Buy
- 4 Affordable Car Brands You Won't Regret Buying in 2025
This article originally appeared on GOBankingRates.com: Are You Smarter Than a 5th Grader? Even Adults Fall For These Debt Traps
