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Zhi Finance » Why is credit card debt not a good thing?

Why is credit card debt not a good thing?

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Credit cards are amazing. A credit card can save your life. In times of urgent need, you can buy everything even if you have no money. If emergency rescue is needed, credit cards can save your life. However, the debt accumulated by credit card consumption can also overwhelm you like an anchor.

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Because credit cards are easy to handle and use, they seem harmless, even beneficial. Many people spend their holidays by credit card seasonally, or purchase on holidays, or pay off the debts of the previous season before the arrival of the new season’s purchase every year (only a few thousand dollars can eliminate hundreds of dollars wasted on interest every year). Others are more serious. Some people can’t stop consuming when their ability to repay reaches the limit, which leads to the rise of debt.

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Credit card design is flexible. The set minimum payment sometimes covers almost only interest, resulting in a credit card debt of $10000 that can theoretically be paid off in decades. Finally, flexibility becomes the problem.

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Another characteristic of credit cards is high interest rates. If your card has a grace period, you may have to pay more than 12% annual interest (if you have good credit). If your card does not have a grace period, you may have to pay more than 20% of the annual interest. If you are overdue, you may have to pay more than 24% interest. In contrast, the interest on mortgage or car loans is only 4%.

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Unlike mortgage interest, credit card interest cannot be deducted by tax. This makes credit card interest more expensive.

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If you ask the credit card issuer to remind you when to stop swiping your card by setting a ceiling, you may be able to control consumption, but the cost is too high. If you can control your credit card consumption according to your income level, the credit debt problem will disappear. In other words, if you don’t have to pay interest on your credit card debt, you have more money to spend.

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For example, if your credit card limit is $10000, your debt is close to this level, and you don’t pay off every month, you will pay $200 in interest every month. That adds up to $2400 a year. This is a waste of money. Is $2400 enough for you and your family to enjoy the holiday or Christmas?

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Even if you control your credit card consumption, these credit card debts will still torment you. If you are out of control and keep applying for new cards to prevent the monthly debt increase, you may be unconsciously heading for the cliff of financial collapse. One day, if you have no credit card available, you will slip into the abyss.

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Credit card is a magic weapon to ensure safe consumption. In an emergency, using credit cards is wise and part of a rational life. It is not the best way to use credit card to consume excessively in stages. Saving is. Having to borrow a little money every month is a painful and chronic financial suicide. Stay away from the cliff and learn to control credit card debt before credit cards control you.