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Avoid the Credit Card Trap!

10/4/2011 9:30:41 AM

Despite growing up in a very modest-income family, we were NEVER financially strapped.

That’s because my parents stuffed envelopes with cash for all key expenses and we lived on that.  No money, no spending—and definitely no credit card overspending.

I’ve taken my parents’ conservative approach to heart by spending less than we earn and always paying off our monthly credit balances. That’s one reason we’ve always lived financially stress-free.

Sadly, we are witnessing a national tragedy of epic proportions.  We’ve turned into a society where overspending and debt have taken control of millions of lives, resulting in skyrocketing bankruptcies and enormous family stress. Our government is in the same pickle.

How on earth did this happen? After all, it hasn’t always been this way! Here are several reasons:
  • The widespread availability of credit cards and a lack of knowledge and discipline to use them responsibly
  • Educational institutions have not placed financial literacy as a priority despite the importance of budgeting and investing in daily life
  • The rise in consumerism and cultural focus on “things”
 
The fact is, easy access to credit cards has given consumers a false sense of financial capability, luring them to spend much more than they earn.  Today’s average family has several credit cards with monthly balances well into the thousands of dollars because they spend more than if they were forced to pay cash. They fail to pay off their monthly balances and the finance charges mount. Their “things” cost much more, and eventually, there’s a day of reckoning.

For example, let’s assume you bought a computer worth $1,000 on your credit card with an 18% annual interest rate. You decide to pay the minimum monthly balance of $30. By the time you’ve paid off the computer, you will have spent $1,396 over a 3.9-year period! That’s almost 40% more than the cash cost of the computer! Yet, interest costs are often completely disregarded by American consumers. 

Thankfully, you needn’t be a rocket scientist to know how to manage your finances well. You simply need to know the basics and abide by the disciplines and key principles—to use credit wisely and sparingly and to resist buying if you can’t pay cash.
“Credit buying is much like being drunk.
The buzz happens immediately and gives you a lift. The hangover comes the day after.”
Joyce Brothers
 
Do you have some good strategies for avoiding or overcoming excessive credit card spending and debt?  Jump into the conversation by leaving your
suggestions and comments below.

 Also, we invite you to share this with friends and encourage them to sign up for our newsletters by emailing me at dtrittin@dennistrittin.com.


Tagged as: finances, financial literacy, net worth, debt, wealth, credit cards

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Comments On Avoid the Credit Card Trap!

Christy - 11/28/2012 5:56:40 PM
I had no credit card debit. Last April I found out that my granddaughter was put in foster care. She is three and resides in a foreign country. I have had to hire an attorney where she lives, an American adoption lawyer, family lawyer and immigration lawyer. I am up to $50,000.00 in legal fees but I will get my granddaughter someday and it will be worth it. I could have never done this had I been in debit nor did I ever foresee this happening. Stay out of debit! Life does throw curve balls!! I am an elementary school counselor who is planning to retire now at the age of 105.

Reply by Dennis Trittin - 11/28/2012 6:38:00 PM
Christy, you are one dedicated grandmother and such a blessing to your granddaughter. I hope everything turns out well and wish you and your efforts the very best. (And, that includes retiring before 105!) With the heart you indicate for your granddaughter, I suspect you're an amazing counselor. Thanks for sharing!


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