Studies show that the average American has $4,878 in credit card debt with an average interest rate of 12.78% compounded monthly. If it took the average American 20 years to pay off their debt, how much would they be paying total?

Formula to use: y = a * b^x (or a = p(1+r/n)^nt)

In order to calculate the total amount that an average American who borrowed the sum will pay, we will be making use of the compound interest formula since the interest on the loan given to an average American is compounded monthly.

Formula for compound interest is:

Fv = Pv × (1 + r/n)^n×t

Where,

Fv = future value (the total amount that an American will pay)

Pv = present value (initial amount borrowed)

r = rate of interest

n = number of times of compounding in a year

t = time (period a loan will run)

Here,

Pv = 4,878

r = 12.78% or 0.1278

n = 12(every month)

t = 20

Substituting appropriately we will have:

Fv = 4,878 × [1 + (0.1278/12)]^12×20

= 4,878 × (1 + 0.01065)^240

= 4,878 × (1.01065)^240

= 4,878 × 12.7112213

= $62,005.34¢

Therefore, the total amount that an American who borrowed that initial amount will be paying after a period of 20 years is $62,005.34¢

Studies show that the average American has $4,878 in credit card debt with an average interest rate of 12.78% compounded monthly. If it took the average American 20 years to pay off their debt, how much would they be paying total? Formula to use: y = a * b^x (or a = p(1+r/n)^nt)

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Studies show that the average American has $4,878 in credit card debt with an average interest rate of 12.78% compounded monthly. If it took the average American 20 years to pay off their debt, how much would they be paying total?

Formula to use: y = a * b^x (or a = p(1+r/n)^nt)