A great way to look at credit card management
I love getting newsletters from 1 frugal friend 2 another. Recently, I received a great tip on credit card management that I wanted to share with you. If you like it, feel free to go over to Leslie at a heart for home. She has so many pearls of frugal wisdom that you will get lost before you know it. Hope you enjoy.
Tags: credit-cards, frugal, money-managementCredit Card Management
Keep this in mind next time you’re tempted to “put the pizza on plastic”.The following information is based on an interest rate of 16.99% to 18.99%:If your balance is $1000.00 and your minimum required payment is $20.00, then $15.00 of the payment goes to interest and only a small portion pays down the principal. If during the next month you charge $15.00 or $20.00 on that card the same thing happens again.Here’s a common scenario for many credit card users…
With a $1000.00 balance on your card and a $20.00 minimum payment due ($15.00 will be for interest. Only $5.00 will be for the principal to actually pay down the balance. Your new balance is $995.00.Yep! You paid $20.00, but it was only worth $5.00
By only paying the minimum due, you’ll not be able to get off this merry-go-round for years!! You must work hard to get the balance down and here are just a few ideas:
Double the payment. This way your $40 will count for $25 on the principal rather than only $10 if done separately.
Avoid using the credit cards and thereby raising the balance.
Use cash for those little expenses that REALLY will multiply when charged to your credit card.
Pay the bill on time! One of my credit cards charges a $29.00 late fee. Yikes!
Watch that credit limit. Some cards charge a fee if you go over you credit limit–mine charges $29.00 for that privilege!
Learn to be more frugal! Wait a little longer to buy new items, another week on the next haircut, bring your lunch from home, and so on.
Some reasons to avoid credit card debt:
It robs you of your time and money because of the effort needed to get it paid back.
It robs you of your peace of mind because it’s nagging at you each month
Sadly, it’s much more fun charging it up than paying down the balance.
Copyright 2000 by Leslie Sausage
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POSTED IN: budget, financial matters, frugal living
3 opinions for A great way to look at credit card management
Karen
Dec 3, 2006 at 7:47 am
Our society definitely has issues with debt. The instant gratification thing has been put into our brains for so long. If you are debt, you definitely are a slave to your lender. If you are charging things and not thinking about it now, you definitely will later and when you do, you will realize this is true.
I have a friend that has been charging things for her kids that they don’t need. She was also charging clearance stuff because she said it was cheaper to get it on clearance. I had to help her realize how much more she was going to be paying for clearance stuff by charging it. After interest charges, it isn’t such a good deal.
I hope people will read this and try to avoid credit card debt this season. My kids don’t need much and I’m not going into debt to get them things they don’t need. We have too much stuff in my house already.
Tracee Sioux
May 3, 2007 at 2:09 pm
Having been in trouble with credit cards before we no longer have them. PERIOD. We finance nothing - it’s possible to live within your means. I think there is a lack of education about personal finances, but I took a class called Financial Peace University and finally felt I knew what I was doing. http://traceesioux.blogspot.com/2007/01/i-saw-satan-on-tv-and-hes-little-dork.html
Karen
May 3, 2007 at 5:33 pm
Tracee,
I just finished my Financial Peace classes this week. I’ve written several posts about it. Being debt free has been a goal for a while, but I found the investment information very helpful.
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