Yesterday we discussed using credit cards as a substitute for cash, not a way to borrow. The obvious conclusion, then, is to be sure to pay your credit card balances off in full every month. Never carry a balance on your credit cards.
If you spend $1,000 on your credit card, and then just make the minimum payments, that item can easily end up costing you $2,000 or more when you add in the interest. Was the item worth $2,000? Obviously not, it was only worth $1,000. That’s the danger with compounding interest.
If you need to borrow money, go to the bank and get a loan. The interest rate will be much lower if you qualify. Even better, pay cash, and if you do use your credit card, pay off the balance in full every month.
