One of the quickest ways to prevent wealth is to become burdened with credit card debt. The debt often starts out innocently enough but soon grows out of control. Even worse, the debt can years to pay off if only the minimum payment is applied.
Example:
Bob turns 18 and signs up for the 1st credit card he can find. It charges a 21% interest rate. He needs a laptop for school. He finds one he likes, it costs $800. After receiving the bill a few weeks later, he finds that he only has to pay 5% of the amount or $40.00. He continues to do this every month. Guess how long it takes before he actually owns his computer? 5 years and 6 months! Keep in mind that it’s likely he’ll buy a new laptop before 5 years is up, meaning that he’ll still be paying for something he doesn’t even own anymore.
The situation would get even worse if Bob bought more stuff and only paid the minimum. The minimum payment is how credit card companies get rich. In the above example, he gave them $371 more than he had too.
The good news is this isn’t hard to prevent. Just:
- Think first if you really need to purchase the item.
- Next, can you pay off the credit card bill the minute it comes in?
- If the answer is yes, then charge the item.
- If no, start saving.
Follow these rules and you won’t ever have credit card debt.
There. Easy. Done.
