But, be careful....
by Cinse Bonino
Don't you just wish you had your very own credit card? That you could simply hand over that little plastic rectangle in exchange for ALL the beautiful things you want to own?
Maybe you already use a parent's card to buy jeans online. Maybe you even have a card with your own name on it, but Dad or Mom still pays the bills. It IS nice to not have to bother with messy old money when you are loading up at H&M or wherever your favorite purchases come from, but beware...
Because even though charge cards seem so painless, so clean, so efficient, and so EASY, they can produce... loud drum roll please... charge card debt!!!! So what's the big deal with debt. Doesn't like-come-on everyone have some? Many if not most people DO have debt, but we are talking...
OUT OF CONTROL debt. That's a little different.
See in theory, charge cards are used to buy something THIS month that you pay for NEXT month when you get the bill. If you DO this, then it doesn't cost you anything extra. If the price tag on that slick skirt said $35 when you handed the sales clerk your card, you will receive a bill in the mail from the charge card company for exactly $35 (provided that is all that you bought).
This is a good time to mention that some cards charge you a yearly fee to use their card. It can be as little as $25 or as much as $350 for a premium card. And charge cards and credit cards are two names for the same thing.
Meanwhile, back at the skirt. Say you bought an entire wardrobe at the same time. You went absolutely whacko and bought $3,000 worth of clothes. Yikes! Oops, but hey, cool, cool clothes. Your bill comes and you DO NOT, I repeat DO NOT have $3000. What do you do? Will they take your beautiful clothes back?
You don't HAVE to pay the $3,000; you can pay the minimum payment. That's the smallest amount that the credit card company will accept and NOT sic a collection agency on you! But, here's the catch. They charge you interest.
That means that they make you pay them extra money for NOT paying your bill all at once. Interest rates can vary from 3% to 29%. If you miss payments, your rate goes up. So, that $3,000, IF you paid it back in a little over a year, could cost you around $3,300 or $3,600! You heard me! You could end up paying hundreds of dollars extra for your clothes.
Why do people do this?
So they can have TODAY what they can't afford until TOMORROW or maybe even next year. This is a choice. If it's cool with you to pay extra to get what you really can't afford right now, that's your choice. But there's one other little thing that happens...
People get OUT OF CONTROL!
Credit cards give you a credit limit. This is the maximum amount you can charge on your card. People want to keep buying things that they can't afford so they get more cards. Soon you are paying the minimum payment on lots of cards. You end up paying hundreds and hundreds of dollars each month just to pay off the minimums on all your cards. The interest keeps piling up because if you don't pay off the balance the interest is figured and added each month. You pay 1/12 of 15% each month in interest if your rate is 15% per year. But it never stops till you've paid in full.
And if people don't stop buying, then the payments can add up to an amount that keeps them from spending ANY money on what they want because all their extra money is being paid for the interest on things they bought so long ago they might not even still have them! Don't let this happen to YOU.