Credit Card Debt: How to Become Credit Smart

Jeanette Joy Fisher
 


Visitors: 397

Being able to buy things on credit has allowed Americans to own and enjoy things-often for years-without having to wait and pay cash for them. In that way, the concept of credit has been a boon to experiencing the American Dream. Unfortunately, there is also a dark side to credit-one that can turn the American Dream into a life-destroying nightmare.

The figures are startling. More than 70 percent of American divorces are caused by the stress brought on by financial difficulties, and three out of every four Americans are a mere three paychecks away from having to face potential default on their debts.

But how can this happen in the richest country in the world? The answer is simple: misuse of credit. In order not to become one of those depressing statistics, it's important that you become credit smart-long BEFORE you find yourself in financial difficulty over your head.

Credit Card Debt Costs

First, let's look at the nuts-and-bolts of what credit card debt actually costs. When you buy something using a typical credit card, you will, on average, end up paying more than 130 percent above the actual cost of that item, compared to what it would have cost if you had paid cash. No matter how terrific the sales price may have been, your savings will be more than offset by the interest charges you'll end up paying if you pay by sending the monthly minimum payment to your credit card company.

If you pay the minimum amount suggested on your bill each month, you'll normally be paying 90 percent interest, with only the remaining ten percent going to the reduction of the principal on your balance. It can take years to pay off relatively high ticket items, and you'll end up paying many times more for the item than its original sales price. Yet more than 70 percent of American consumers pay only the minimum amount on their monthly statement and never give any thought to how much interest they'll pay over the life of the debt.

To avoid potentially devastating financial difficulty, and to save money (and possibly your marriage), it's important to become credit smart.

First, pay cash, if at all possible. Second, if you can't pay cash at the moment, ask yourself if you truly NEED whatever you're contemplating at the moment. Perhaps you can put it off for awhile, and then pay cash for it.

If you need the item right away, put it on your card, but when the bill comes, always pay a little more than the minimum amount each month. Even a small amount can save you hundreds, or even thousands, of dollars over the life of the loan. Finally, if you can, pay off your credit card in full each month. That way, you'll avoid paying any interest at all.

Credit card debt can ruin your life and the lives of everyone in your family. Take time to learn how to use it wisely-to improve your quality of life without creating undue amounts of stress.

Copyright © Jeanette J. Fisher.

Jeanette Fisher teaches how to get out from under credit card debt , how to use credit to make money, and six ways to build strong credit to finance your first home and multiple investment properties. For a free credit advice and free ebook “Credit Tips for Mortgage Financing, " see http://worryfreecredit.com

(584)

Article Source:


 
Rate this Article: 
 
Credit Card Debt Problems - Reduce Credit Card Debt By Understanding The Traps
Rated 4 / 5
based on 5 votes
ArticleSlash

Related Articles:

Consolidating Credit Card Debt The Smart Decision

by: Nick Makaryk (June 26, 2008) 
(Finance/Debt Consolidation)

Credit Card Debt Tips - How to Capitalize on Federal Stimulus Money For Credit ..

by: Matt Couch (November 23, 2009) 
(Finance/Debt Management)

Stop Paying Credit Card Debt - How to Gain Leverage Over Your Credit Card ..

by: Matt Couch (December 09, 2009) 
(Finance/Debt Management)

Using Equity To Pay Credit Card Debt: Smart Move?

by: Mary Wise (October 19, 2006) 
(Finance)

Quick Tips For Credit Card Debt Reduction How to Eliminate Credit Card Debt Fast

by: A. C. West (July 21, 2008) 
(Finance/Debt Management)

Credit Card Debt Settlements - How Can You Find Credit Card Debt Settlement ..

by: Matt Couch (December 07, 2009) 
(Finance/Debt Management)

Credit Card Debt - Why Credit Card Companies Accept to Debt Settlement Deals

by: Matt Couch (December 15, 2009) 
(Finance/Debt Management)

Credit Card Debt Info - Multiple Credit Card Holders and Debt Management

by: Matt Couch (December 09, 2009) 
(Finance/Debt Management)

Paying Off Your Credit Card Debt - Two Simple Ways to be Credit Card Debt Free

by: John Stevenson (January 11, 2008) 
(Finance/Credit)

Credit Card Debt Problems - Reduce Credit Card Debt By Understanding The Traps

by: Carrie Reeder (November 28, 2005) 
(Finance/Debt Relief)