Final answer:
Ross most likely has a charge card, which requires the full balance to be paid each month, avoiding interest charges. Credit card debt can accrue significant interest, and minimum payments may lead to long-term debt. Paying the full balance, like Ross, is a financially sound practice to prevent accumulating debt.
Step-by-step explanation:
If Ross must pay the full balance on his credit card every month, he most likely has a charge card. A charge card is different from traditional credit cards in that it does not allow for a revolving balance; the full amount must be paid by the end of each billing cycle. This helps to avoid incurring interest since no balance is carried over from month to month. It is crucial to manage credit card debt responsibly, as carrying a balance can result in significant interest charges, as evidenced by many Americans who collectively owe billions and pay a substantial amount in interest annually. For example, let's say you have a credit card balance of $2,000 and the card requires minimum payments of $60 a month.
This is typically calculated as a percentage of your balance - often around 3%. If you only make the minimum payment, you will not only be paying off the principal amount you owe but also the interest that accumulates each month. Over time, this can lead to paying much more than the original amount due to the interest rate, which on average was 15% per year as of 2015. Therefore, it is important to pay off your full balance whenever possible to avoid these interest charges, just as Ross is required to do with his form of credit card. Being mindful of credit card use and avoiding the pitfall of minimum payments can prevent a cycle of debt that can be difficult to escape from.