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One reason Jim always avoided credit card debt was that they were raise by very old school. If you know anyone who lived through the Great Depression of the 1930s, you may have heard their stories about what it felt like to have total poverty everywhere.
While some stores offered credit to good customers, credit cards as we know them today did not exit. What this moment was that if you did not have any money, you were in trouble. As a result, people who live through the Depression came out of it with an intense dislike of being in debt and a powerful belief in the importance of saving. Ask any survivor of the Depression what they think about debt and I will bet the answer you get is similar to this. The only time borrowing makes sense is when you do it to buy something that can go up in value.
I meet people who look rich. You probably meet them too. They have nice clothes, drive nice cars and sometimes even live in nice homes. But when you peel back their finances, what you find is that they do not own what they wear or drive or live in. It is all rented or paid for with plastic. All they really have is a heaping mound of credit card debt.
Now, what do you think most people do when their credit card bill arrives every month? If you said they pay the minimum amount due, you are right.
Guess how much it will end up costing you to pay off an $8,400 balance on a credit card that charges 18 percent interest if you pay only the minimum each might?
If you pay just the minimum due each moth on an $8,400 credit balance, you will wind up having to make 365 monthly payments before it goes to zero. That is assuming you never charge another dime on the card, never get hit with a late fee and are never billed for an annual service fee.
Can you imagine it? Thirty years and five months’ worth of payments and that is for a card that charges 18 percent annual interest. Many cards charge much higher rats, some as high as 29 percent.
Here is the bottom line. You cannot come a Millionaire if you run up credit card balances and pay only the minimum due. All you will accomplish doing that is making the credit card company rich while you stay poor.
The most dangerous thing about credit card debt may be how easy it is to get sucked in. Take the common practice many retailers follow of offering you a discount if you agree to sign up for a sore charge card. Here is how it works. Imagine you are at the local outlet of a national clothing chain and you have picked out $1,000 worth of new outfits. While ring in up your purchase, a really nice, chipper, good looking sale person will smile at you and ask. Would not you like to save 10 percent on y9our purchase to day? You know, you could save more than a hundred dollars by opening up one of our charge accounts, It will only take a minute.
A typical shopper, trying to be smart, will think, oh great, I save a hundred dollars. Let us do it.
Now, imagine that when the bill arrives, you make the minimum payment due, which is exactly what the sore hopes will happen. If the interest rat is 18 percent, the $1,000 balance will take you 153 payments or nearly thirteen years to pay off. By then, the clothes will be long gone an you will have paid more than $2,100 for your $1,000 purchase.
