Getting out of debt is a good deal all-around

Credit cards have been around for a while, mainly during the past sixty years.  They’ve made it easy for people to start a tab: buy now, pay later.

The problem with buy now, pay later, of course, is that it’s likely that the thing you’re buying will cost more money in the long run.  There are a couple of times it won’t:

  • If you pay your credit card balance off during the grace period, you usually won’t pay interest.  (Cash advances accrue interest immediately, though.)
  • If you take advantage of a 0% promotional APR, you won’t pay interest during the promotional period, as long as you follow all of the rules.

If neither of these apply, then you’ll pay interest on the credit card balance that you carry, which means you’ll pay more for whatever you bought on credit.

This is a bad deal.  It’s like an anti-bargain.  We should aim to pay less than retail, not more!

Turn around that bad deal into a good one

Someone carrying a $5,000 credit card balance at 15% will pay an extra $750 in interest on that balance, each and every year.  It’s like taking about $2 each day and flushing it down the toilet.  (I can hear the flushing sound now!)

The way to turn this around is to pay down the debt.  Spend less than you earn and pay more than the minimum balance on the credit card of your choice — the one with the lowest balance or the highest interest rate, take your pick — to get rid of the debt.  Credit card companies are now required by law to tell you exactly how long it will take to pay off their debt, in prominent fashion on each statement,  if you pay just the minimum due.  Take their word for it, be very afraid, and pay more than the minimum!

Can we give ourselves better deals to the tune of $10,000,000 in paid debt by end of April?!

Jeff Rose wants to see $10 million in debt paid off in ninety days.  I invite you to check out what the Debt Movement is all about.  Or, if you’ve already heard about it, and are ready to throw your credit cards into the ring, then you can sign up right now in the sidebar!

John Wedding

Husband. Father. Web publisher. Musician. John has blogged at Mighty Bargain Hunter since 2005, helping people to recognize life's good deals.

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Comments

    • John Wedding says

      That’s great. My current mortgage is set to be paid off when I’m 68, so I’ll need to step up the pace. :)

  1. says

    Won’t it be nice when more and more people are debt-free (other than mortgages) and able to start building a nest egg? My mortgage is all I have right now, although I fear we may have to buy another vehicle soon to replace mine (our main family vehicle is coming up on 200,000 miles). I think I’m going to start putting away some cash for that purchase right now!

    • John Wedding says

      Saving up for a car is a great idea. We had to take out a vehicle loan for the first time about a year ago, so we’re looking forward to paying that down as soon as we get our savings account in better shape.

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