What is the Credit Trap?

The Credit Trap that a third of US Households have fallen into usually starts with buying an expensive vehicle. The other initiator is not paying off credit cards monthly. "Oh well I will just pay it off next month" said the new Credit Card owner. This will lead quickly to large debt.

How the minimum Credit Card payment keeps you broke!

It doesn’t seem like much money for interest, the first time you just make the minimum payment.  You find yourself $500 or $50 short so you just make the minimum payment.  You now lose both the float and the interest free grace period on future purchases until you are paid in full.

You are now just like 40% of credit card holders who carry a balance.  It is so easy to let the balance ride and not get around to paying it down.  This will cost you. A Lot.


If you ever listen to a Dave Ramsey radio or Youtube broadcast you will hear people telling stories of how their credit got away from them. $20,000 in credit card debt is nothing for many of these callers. $150,000 debt on two cars and credit cards is common. $100,000 in credit card debt is not unusual for high income callers. $100,000 at 18% interest comes to $18,000 a year or $1500 a month in interest.


Almost none of your personal interest can be deducted from your taxes. In just a few cases you can deduct some of your residential loan interest.


You work hard for your money, do not waste it paying interest. Do not borrow on your credit card to buy stuff. Always pay off your credit card every month.

Comments

Post a Comment

Popular posts from this blog

Buildiing an 800 Plus Credit Score

A perfect FICO or Vantage 300 Credit Score is an 850.  The lowest score is a 300. An 800 plus credit score is excellent and what most people aspire to.  To earn an 800 plus credit score you must have at least three different credit sources, no missed payments in the last 7 years, Less than a 10% credit utilization, and an average credit history of at least 6 years.       800 Plus Credit Score Requirements The requirements for an 800+ score are rarely stated but here's what I have found: You must have at least three sources of credit. An example  might be  two credit cards and a car loan. Three to five credit cards may get you there. If you add in a Personal line of credit, that will help. You cannot have any missed payments in your credit history in the last 7 years. This is pretty much an absolute. Missed Payments will kill your credit score, especially when you are first starting to build your credit history. You cannot have any Coll...
Read more

Keeping Your Credit Cards Safe While Traveling

  Traveling with credit cards can be convenient, but it's important to take steps to keep them safe and secure. Here are some tips for safely traveling with credit cards: Notify your bank: Before you travel, let your bank or credit card company know where and when you will be traveling, so they can monitor your account for suspicious activity.   This is especially true if you are traveling overseas.  I was in Malaysia once and neither of the two bank cards I took with me would work.  My buddy had an AMEX that worked so we did not have to clean hotel rooms to get out of Kuala Lumpur. Carry only what you need: Only carry the credit cards you need for your trip and leave the others at home. This will reduce the risk of losing them or having them stolen.   My Note:  If I am leaving town I carry cards from three different banks, Chase, Cap One, and Wells Fargo.   Close to home I always carry two cards from different banks.  Recently I tried to use...
Read more

Dealing with Lenders and Customer Support

  How to talk to your Credit company First off remember this conversation will probably be noted and recorded on your account.  Next time you call the customer service agent will be able to see the notes of this conversation.  I am always friendly, and nice.  Since I am probably asking for a favor, I ask for help.   If the agent cannot help me I respectfully ask to speak to the supervisor.  If the supervisor cannot grant my request I ask them for suggestions.   Never be a jerk to your Lender This will not be reported to the credit bureau but the will be put on the internal record of your credit card or loan account.  It will state how much of a jerk you were to deal with.  Next time you call the customer service agent will see your previous call notes.  Customer Service agents often deal with angry customers, don't be one of them. Nicely ask them for information and if you want them to help you with something ask nicely for h...
Read more