Credit cards + Interest = Debt
Credit cards are not the problem. Itís your buying patterns that create any problems. How do you avoid debt?
Donít buy anything you canít afford. Simple.
People donít save money like we used to. We want things now. Things before we can afford them. But it actually is not too long to wait to save/have the money to buy most of the things we want. Especially if we arenít paying compounding interest on the things weíve already bought. If we pay once, things are so much cheaper.
If you canít manage your credit cards Ė donít pay them off every month, put them away. Use them when you need to rent a car, or something, nothing else. So basically, credit cards are for convenience Ė you have the money, but it isnít in the form you want. Even better would be to use a debit card Ė direct relationship between cash and buying.
If you do carry a balance on a credit card, you need to include the cost of the interest in the purchase price of the things you buy. Dinner is more than just the $20 or $30 you spent while in the restaurant. The first month, isnít much, but then you pay interest on compounding interest, and so on, until you pay off the principle and all the accumulated interest.
Also, you really need to watch Ďinterest-freeí purchases. When the period is up, interest on unpaid balances is retroactive Ė you pay from the date you bought it. If you take advantage of this selling feature, pay monthly. Divide up the amount by the free interest time and pay regularly the total amount, before it is due.
If compounding interest is the route to creating wealth, the reverse is equally true, compounding debt can be the route to delay and ruin.
Donít get into debt and youíll never have to get out.
Stephanie Mundle is the managing editor of http://www.MoneyMasteryForum.com an informational forum site for the average investor. Take a look. Information on forex, debt, money management, investing and business.
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