Paying off your Credit Card Balance vs the Top Investments of Today's Multi-Billionaires in America

One of the smartest places for Canadians to put their money, is on their credit card balance.  Not paying it in full every month can create a massive debt snowball effect.
    Even the richest people in North America have a hard time compounding their wealth quicker than the rate that a credit card balance will hold you back.  If you would have invested $10,000 in each of the richest Americans companie's at their initial public offering, and at the same time spent $10,000 on your credit card and never paid it off, you would have a net debt of $270,898,881 today.  The total of the biggest investments in today's richest Americans, can't keep up to an unpaid credit card balance, what chance do you have in getting ahead while carrying a credit card balance?


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Credit Card Nerd Math

A 19.99% interest rate that is compounded monthly will compound at a rate of 21.9% annually.  (19.99%/12)12 = 21.9%.
    The tax rate we used was Ontario's top marginal tax rate for capital gains (26.77%) and Ontario's top marginal tax rate for the dividends (53.53%).  We used the regular marginal tax rate, because dividends derived from U.S. corporations are not eligible for the dividend tax credit.
    Below we have a chart with the richest Americans, excluding those that made their billions with a private company.  The first column is the billionaire, the company they built and the IPO date of the stock.  The next column is what your credit card balance would be if you could theoretically buy stock on a credit card and never pay it off.  The third coloumn is the stock value from an initial $10,000 investment, the total amount of dividends that were paid and the net balance after taxes have been paid.
    The numbers won't be exact, to keep the calculations simple, we didn't factor in the exact month that the company had their initial public offering.  We also removed any Americans that made most of their wealth and still have most of their wealth in private companies.



Investing $10,000 in the top Billionaire's Stock during the IPO vs 21.9% Line of Credit

Billionaire
Stock
(IPO Date)

Credit Card Debt

Stock Value
Dividends
After Taxes

Stock Gain - Debt
(Negative)

Bill Gates
Microsoft
(1986)

$3,802,867

$5,418,073
+ $1,153,181 Dividends
$4,512,821 After Taxes

$709,954

Warren Buffet
Berkshire Hathaway1
(1962)

$440,757,898

$279,197,368
+ $132 Dividends
$204,463,616 After Taxes

($236,294,282)

Jeff Bezos
Amazon
(1997)

$430,596

$3,907,600
+ $0 Dividends
$2,864,212 After Taxes

$2,433,616

Mark Zuckerberg
Facebook
(2012)

$22,081

$29,300
+ $0 Dividends
$24,133 After Taxes

$2,052

Larry Ellison
Oracle
(1986)

$3,802,867

$6,040,238
+ $386,468 Dividends
$4,620,180 After Taxes

$817,313

Larry Page and Sergey Brin
Google
(2004)

$107,658

$178,931
+ $0 Dividends
$133,708 After Taxes

$26,050

Walton Family
Walmart
(1969)

$110,198,115

$85,281,273
+ $19,900,000 Dividends 2
$71,701,683 After Taxes

($38,496,432)

Sheldon Adelson
Las Vegas Sands
(2004)

$107,658

$9,425
+ $1,996 Dividends
$10,506 After Taxes

($97,152)

Total

$559,229,740

$288,330,859 After Taxes

($270,898,881)


1 Not when Berkshire Hathaway had its IPO, but on the first date that Warren Buffet started accumulating shares at only $7.60 a share.
2 Not an exact number, we didn't calculate every last dividend back in the 70's, but we rounded it up to the nearest $100,000.  The cumulative total of all the dividends paid in the 70's, won't even come close to one quarterly payment in 2016.


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A Wake Up Call

If you think that you will be okay if you keep having a substantial balance on your credit cards, then you might want to think again.  Even some of the top billionaires in North America, can't multiply their wealth quicker than a credit card balance can take it away.  The numbers will more than likely only get worse.  Probably by the end of the decade, only one or two of the current richest Americans will be ahead of the credit card debt rate starting at their initial public offering date.