How High-Interest Debt Affects New Grads
It started as a "just in case" card. A $1,500 limit for emergencies. Then a textbook went on it. Then a car repair. Then a few more things. By the time you graduated, the balance was $3,000 and you were making minimum payments.
Now you're earning a salary, and somehow the balance is still there.
Why new grads are especially vulnerable to this leak
New grads often start their careers carrying credit card debt from their student years. It's common, it feels manageable ("I'll pay it off once I'm settled"), and it sits in the background while you focus on starting your new life.
But at 19% APR, a $3,000 balance generates $570/year in interest. That's $47.50/month just for the privilege of owing money. If you're making minimum payments of $60/month, only $12.50 is actually reducing the balance. The rest is interest.
High-interest debt, defined as anything at or above 7% APR, is the fourth rung of the Leak Ladder. Credit cards sit well above that threshold at 15-25%. The reason the Leak Ladder prioritizes this: the stock market averages 7-10% annual returns. If your debt costs more than that, paying it off is mathematically the best investment you can make. Every dollar toward the credit card earns you 19%. No index fund does that.
What this actually looks like
You get your paycheck. After rent, food, transport, and bills, you have $600 left. You put $60 toward the credit card minimum. You put $200 in savings. You spend the remaining $340 on life. This feels responsible.
But the credit card is costing you 19% while the savings account earns 4%. After a year of this, you'll have $2,400 in savings earning roughly $8/month in interest, and you'll have paid $570 in credit card interest. The savings earned $96. The debt cost $570. The debt is literally undoing your savings.
What to do about it
The Leak Ladder puts high-interest debt at rung four, right after building a starter emergency fund. Clear the expensive debt before saving or investing. The math is unambiguous: no savings account or investment consistently beats 19% guaranteed.
Take the Know Your Digits quiz to find out if this leak is active in your finances.