The Truth About Credit Cards

The Newsy Neighbour Magazine

www.TheNewsyNeighbour.com

May Issue 115

It is so easy just to pull out your credit card when there is that purchase you cannot pass up because it is such a great deal. The problem is, most people have two, three, four or more. I’m here to tell you your Credit Card is Evil, and I’ll tell you why. Did you know that if you only make the minimum payment on your credit card, it could take years to pay off the balance? Not only that, but you could end up spending hundreds, possibly even thousands in interest by the time the balance is repaid.

Consider having a balance of $5,000, at 14% interest and a minimum payment as 2% of your credit card balance. Making minimum payments only, it would take you 22 years and $5,887 in interest payments to pay off this debt. Increasing your payments to $125 a month would allow you to pay off the same debt in less than 6 years and spend only $1,775 in interest. Not only does increasing your payments allow you to pay off the balance sooner, you also save money in interest.

OTHER SMART FINANCIAL DECISIONS TO MAKE

Consider the small choices you make with your money. Every financial worry you want to banish and financial dream you want to achieve comes from taking tiny steps today that put you on a path toward your goals.

Save a Bit at a Time

Focus on what is within your power: the sums you can sock away every week or month to get closer to what you're trying to achieve. Put $50 a week into a bank savings account earning 2 percent interest, and in three years you will have saved more than $8,000.

Have a Little Self-Discipline!
Okay, so where do you find the money to put toward your financial goals?  People think they don’t have the money for their goals, but look at your spending and you may find lots of "wants" to cut. Pull out your three most recent bank and credit card statements, circle every charge or debit that is not a necessity, and ask yourself, "Can I eliminate this cost entirely?" If not, can you scale it back 30 to 50 percent (downgrade the cable, say, or opt for the less-pricey cell package)? Every time you cut expenses, you can put the money toward bigger goals. And if you suffer from late-payment-itis, set up auto bill pay through an online bank account. This will save you those $39 late fees on credit card payments.

Spend $50 a Month for Peace of Mind
That's about what it would cost a healthy 40-year-old woman to buy a million-dollar 20-year level term life insurance policy, figure on less if you're younger and more if you're older. But the idea is this: A small amount of money buys your family protection if you die prematurely.

Add a 13th Mortgage Payment; Pay Off Your Loan Five Years Faster
If you're in your 50s and plan to live in your current home forever, try to pay off the mortgage before you stop working so you remove that big cost from your post-retirement expenses. One way to do so is to make one extra mortgage payment a year. You can even spread the payment over 12 months. Let's say you have a $1,500 monthly mortgage payment and a 30-year fixed-rate mortgage. If you divide $1,500 by 12, that's $125, so instead of paying $1,500, you send in $1,625 each month. That will cut your repayment time by five years and reduce your interest payments over the life of the loan; for a $250,000 mortgage charging 6 percent, you will save $61,000 ($228,000 in interest payments versus $289,000). That $125 a month may be tough, but it's doable. It's one small step now, and one giant leap toward future financial security.
 

 References: www.suzeorman.com