Why are credit cards a problem? The answer is simple:
Purchases made on credit cards can cost you a lot of money.
Let’s assume you go to the store and buy a pair of pants and shoes for $200. How much did your purchase cost? If you paid cash, the answer is $200.
If you used your credit card, the answer depends on the interest rate the credit card company charges you and how much you pay off each month. If you used a department store credit card that carries an interest rate of 22%, and if each month you only paid the minimum monthly payment, it could take your almost 6 years to pay off the balance and you will pay $145 in interest charges.
Therefore, if you pay by credit card, the pants and shoes could cost you $345.
The key point to remember is this:
If you don’t pay your balance in full each month, credit cards greatly increase the cost of everything you buy.
Try our Credit Card Repayment Calculator to determine the actual cost of making minimum payments on your credit cards each month.
If you need help paying off your credit card balances, contact an advisor today.