Let's face it. Life is expensive, but that is no reason to be constantly paying more than something is actually worth. Unfortunately, millions of American's are paying more than they should for the things they buy every single day. The culprit$%:
Credit card debt.
Although credit cards are convenient tools that allow for easy transactions, make online purchases simple, and eliminate the need to carry around vast amounts of cash or your checkbook, too many people abuse their credit cards. And believe me, with the interest credit cards charge, you will be the one who gets abused.
Although bank interest rates are currently are in the arena of 5 to 7%, many, if not most, credit cards charge annual interest of 15% or more. This may not sound like a lot to you, but consider the effects of not paying your credit cards in a timely manner. Not only will you get hit with steep finance charges for not paying your minimum amount on time, but your outstanding balance will start accruing interest.
To those of you not familiar with the concept of compounding of accrued interest, perhaps a simple example will teach the importance of not carrying credit card debt. Let's pretend that you have an outstanding balance of $1,000 on your credit card. If you don't pay down this amount, and your annual interest rate is 15%, you will now owe $1,150. Now let us suppose that you don't pay your bill for another year. The 15% will now apply to the $1,150 instead of the initial $1,000. That is compounding in nutshell. Now consider that many people carry credit card debt in the tens of thousands of dollars. This interest can explode in front of your eyes.
We are not saying that you shouldn't use credit cards, and we understand there are circumstances that require you to put off paying your credit card bill for a few months. Additionally, many credit cards will offer 0% interest for several years to encourage you to buy items. Paying down these debts doesn't make sense, especially when you can take the money and invest it until you need to pay the bill. But please, be responsible with your credit card and make every effort to pay off interest bearing credit cards as soon as you can to prevent overpaying for your items and to keep your credit rating as high as possible.
Happy shopping!
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