Credit Cards Are Not Bad
After my last post you probably think I believe credit cards are evil. I really don’t. Credit cards are actually a good thing if you pay them off completely every month. They help you build credit and you can get perks such as airline miles. They are also more convenient than having to run to the bank every few days to get more cash.
I believe the way to stay out of credit card debt is to live by one simple rule. If you don’t have the cash in the bank to pay off the credit card at the end of the month, don’t make the purchase.
Credit card companies are more than happy to loan you money so that you can buy something you don’t have the cash for. However, they want something in return. That’s called interest. Interest on credit card balances can be over 20% which is crazy.
Right now you loan your money to a bank (in the way of a savings account) and they pay you at best 4-5% interest. That’s at best. If you get lucky in the stock market you may get 10-15% return but from what I hear that takes a lot of skill and patience. But, the credit card companies are loaning you money and you are paying them 20% to borrow that money.
Everyone sees those outrageous interest rates on credit cards and think those companies are horrible. But, the fact is that you don’t have to take their money. You are making the decision that buying a particular item is important enough to warrant paying 20% of the item’s price to the credit card company. Please realize that racking up credit card debt for non essential items such as a new TV, fancy cell phones, and recreational toys is really adding more strain on yourself. Because now you not only have to come up with the money for that luxury item, you also have to find money to pay the credit card company for borrowing their money. Yikes!
Thanks for letting me share my thoughts. Let me know what you think! 
http://www.keepinglifesimple.net/Freedom_From_Debt.html “Possible solutions to escape the burdens of debt.”
www.OverflowLiving.com “Learning to live the good life that God planned!”
It’s Really Not a Deal If . . .
You don’t pay your credit card off each month in full.
Let’s say there was a great outfit that cost $100. It was on sale for 10% off so you snatched it and put it on your credit card. At the end of the month you decided to only pay the minimum balance required on your credit card. Here’s the kicker. Credit card interest rates are astronomical. Some are over 20%. So, you just paid $90 for that outfit. However, your credit card is going to charge you $18 a month in interest. In 5 months, you will have paid more in interest than you paid for the outfit originally. Still not making sense? Try this.
$100 (original outfit cost) x 10% (store discount) = $90 (what you paid for the outfit) and a savings of $10.
$90 (charge on the credit card) x 20% interest (which is what you pay for the credit card company to loan you money) = $18
Notice that you saved $10 but you are paying the credit card company $18 to borrow the money. After the first month, you just paid $108 for the outfit. After the second month of not paying the credit card off, you now paid $126 for that outfit.
Credit cards are only good if you can pay them off at the end of the month. Otherwise, you end up paying more to borrow the money than you are getting the product on discount.
Feel free to drop me your questions or comments.
