Being able to buy things on credit has allowed Americans to own
and enjoy things--often for years--without having to wait and
pay cash for them. In that way, the concept of credit has been a
boon to experiencing the American Dream. Unfortunately, there is
also a dark side to credit--one that can turn the American Dream
into a life-destroying nightmare.
The figures are startling. More than 70 percent of American
divorces are caused by the stress brought on by financial
difficulties, and three out of every four Americans are a mere
three paychecks away from having to face potential default on
their debts.
But how can this happen in the richest country in the world? The
answer is simple: misuse of credit. In order not to become one
of those depressing statistics, it's important that you become
credit smart--long BEFORE you find yourself in financial
difficulty over your head.
Credit Card Debt Costs
First, let's look at the nuts-and-bolts of what credit card debt
actually costs. When you buy something using a typical credit
card, you will, on average, end up paying more than 130 percent
above the actual cost of that item, compared to what it would
have cost if you had paid cash. No matter how terrific the sales
price may have been, your savings will be more than offset by
the interest charges you'll end up paying if you pay by sending
the monthly minimum payment to your credit card company.
If you pay the minimum amount suggested on your bill each month,
you'll normally be paying 90 percent interest, with only the
remaining ten percent going to the reduction of the principal on
your balance. It can take years to pay off relatively high
ticket items, and you'll end up paying many times more for the
item than its original sales price. Yet more than 70 percent of
American consumers pay only the minimum amount on their monthly
statement and never give any thought to how much interest
they'll pay over the life of the debt.
To avoid potentially devastating financial difficulty, and to
save money (and possibly your marriage), it's important to
become credit smart.
First, pay cash, if at all possible. Second, if you can't pay
cash at the moment, ask yourself if you truly NEED whatever
you're contemplating at the moment. Perhaps you can put it off
for awhile, and then pay cash for it.
If you need the item right away, put it on your card, but when
the bill comes, always pay a little more than the minimum amount
each month. Even a small amount can save you hundreds, or even
thousands, of dollars over the life of the loan. Finally, if you
can, pay off your credit card in full each month. That way,
you'll avoid paying any interest at all.
Credit card debt can ruin your life and the lives of everyone in
your family. Take time to learn how to use it wisely--to improve
your quality of life without creating undue amounts of stress.
Copyright © Jeanette J. Fisher.
About the author:
Jeanette Fisher teaches how to get out from under
credit card
debt. Free ebook "Credit Tips for Mortgage Financing"
http://worryfreecredit.com
