Why is debt even a thing? Because it makes a LOT of companies a LOT of money.
Here’s the thing. Some of the biggest companies in the world are the credit card companies.They don’t offer you money to help you out, they offer you money because they are going to make a lot of money out of you. When they approve your application, they are thinking “Cha-ching!”.
Do you want to just give MasterCard $200? Just for fun? I don’t. $200 could buy me two weeks of groceries (almost), or some new winter clothes, or a couple of fun nights out, or petrol to go away for the weekend and visit friends.
So why have a credit card?
Credit cards can come in handy, that’s for sure. But they are designed to make it a little too easy to spend money you don’t have.
One more time: they are designed to make you spend money you don’t have.
It is an ideal situation for the bank or the credit card provider if you can’t pay in full every month. This is what they’re hoping for, this is where they make their money. If credit cards didn’t make banks lots of money, they wouldn’t provide them at all.
So by all means, keep a credit card, but make sure it is paid in full, every month, no exceptions. If you can’t stick to this, then please cut up your card, pay it off and stay credit card free!
Are low interest credit cards ok?
Some credit cards have very low interest for a limited period of time. If you have one of these, your challenge is to make the most of this time by paying off the card before the rate goes up.
Remember, banks, finance cards, credit cards and businesses that offer loans aren’t there to help you. They are businesses at the end of the day, and their purpose is to make money out of you.
Switching to a low interest card is a great idea if you’re having trouble paying off your card. But make sure you get it paid off as soon as you can and then get rid of it!
What about credit card fees?
On top of your interest charges, you will also have annual card fees. My current card fee is $150 per year. I’m not stoked about giving that to MasterCard either (as well as the $200 interest!) so I’m on a mission to get rid of it.
Skip the coffee and pay off that card
Every little bit of debt you pay off helps. And try really hard to not add to those debts while you’re at it. See if you can find space in your budget to save little bits here and there. And seriously, it seems silly to save small change, but it can add up!
Here’s the maths:
A $5 coffee or snack might not seem like much, but if you buy one every week day, that’s $25 a week. Which is $1,300 a year.
$1,300 a year on coffee seems like quite a bit. You could use that to pay off your credit card, which may mean you can stop propping up MasterCard for good.
And once you’ve paid your card off, then not only do you get the $5 a week back, you ALSO get to keep the $150 that you would have spent on fees and the $200 you would have spent on interest.