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Credit card interest is much worse than most people think. To give you an idea of how credit cards are costing you hundreds of dollars — let's take a look at a typical card. Say you spend just $2,000 on a card with a 19% interest payment and a yearly fee of say, $40. If you pay the minimum payments on that card, it would take 30 years to pay it off and the whopping total would be over $10,000. That means that you have just paid $8,000 in interest to borrow $2,000. You have just spent 5 times the cost of the item you bought. Would you walk into an electronic store and pay $10,000 for a $2,000 40" TV set and happily hand over that extra $8,000 for the privilege of owning it now? If you had waited until you accumulated the cash before purchasing that TV, you would probably be able to buy the even bigger and better one the inevitably will come out next year! Instead, you're stuck with payments.

Next time you buy something on your credit card (I prefer to call them debt cards) remember how much extra money you're handing over if you're planning on making monthly payments. Do you still think credit is a good thing?

Ok, so what is the true cost of your debt?

Let's go back to that TV set. If instead of paying the creditor, you put the monthly payments into a mutual fund with a 10% compounding interest rate, over the same period of 30 years it would accumulate to roughly $200,000. Wow! That's really an expensive TV set. What do you think the credit companies are doing with your money? That's right, they're investing it and earning the interest on that money that you could have earned.

To give you a better idea of how much your debt is costing you, take a look at the chart below. If you're making minimum payments of $300 per month and continuing to make minimum payments, it will take you roughly 30 years to pay off those cards.

Those monthly payments could have grown to over $618,852, if the interest was working for you instead of against you.

Monthly Payment Potentials*

Mo. Pymt.	3 years	5 years	10 years
$ 300	$12,452	$22,968	$59,959
$ 400	$16,603	$30,624	$79,945
$ 500	$20,754	$38,280	$99,931
$ 600	$24,905	$45,936	$119,918
$ 700	$29,056	$53,592	$139,904
$ 800	$33,207	$61,248	$159,891
$ 900	$37,358	$68,905	$179,877
$1,000	$41,509	$76,561	$199,863

Mo. Pymt.	15 years	20 years	25 years
$ 300	$119,533	$215,477	$369,997
$ 400	$159,377	$287,303	$493,329
$ 500	$199,221	$359,129	$616,662
$ 600	$239,066	$430,955	$739,994
$ 700	$278,910	$502,781	$863,327
$ 800	$318,753	$574,607	$986,659
$ 900	$358,599	$646,433	$1,109,992
$1,000	$398,443	$718,259	$1,233,324

*Figures are based on monthly payments placed into a compounding 10% growth mutual fund.

On the other hand, you could always continue using credit and paying back the credit organizations all their interest and let them make the money.

The reason that we are telling you this is to get across the fact that credit is not a wonderful thing that helps you live a fuller, richer life. In fact, the truth is, it's exactly the opposite. You need to eliminate your debt and stay away from credit. It's a hard thing to do and getting rid of your cards can sometimes be an uncomfortable experience. I've seen people break down and cry when they start cutting up their cards. However, if you want to become financially free this is what needs to be done. The myth that you need to have a large income to become wealthy is not true. Many people are discovering that eliminating their lines of credit is the first step to financial freedom and a better way of life.

Now, after saying all that, we do agree that in some situations, credit is good, such as obtaining a mortgage to purchase a home. It can be hard to buy a house without borrowing money. Even then, most people, if they set their minds to it and pay down their other debts, could eliminate the mortgage in around 7 years. Imagine that, having no debts and owning your house free and clear. How would that feel? There are some people who have credit cards and do pay them off every month. If you can do this, well done! You are the exception to the rule. Most people start off with that intention and then, with one thing or another need to delay a months payments and so the cycle begins. It unfortunately seems to be human nature that if you have money, you will spend it. Having a credit card is like having money and you tend to spend it. The best thing to do is use a Debit Card. Then you are actually spending only money, not your future happiness.

 

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