"Spending money you haven't earned yet is like using up years you haven't
lived yet." --MHoppe9581@aol.com
Thanks for the opener, MHoppe. We had been wrestling for weeks with a way
to kick off a section that covers a prickly topic when we happened upon this
post on the Credit Cards message board. In a pithy turn of phrase, this Fool
summarizes the consequences of credit card debt: it steals from your future
to pay for your present.
Last year Americans charged up more than $400 billion on their cards, according
to RAM Research, a credit-card tracker. That'd be just fine, if it weren't
for the interest they paid for the privilege. That $50 billion in finance
charges could have bought the inventory of 5,000 Jag dealerships. Or a
2,000-season contract with Michael Jordan. Or Nike, the company, with $34
billion to spare.
Instead, the only beneficiaries of this monumental sum were the suspendered
executives at the lending institutions who probably used the money to buy
more suspenders and some lovely paperweights. (Take a moment to remove your
cards from your wallet, fan them across the kitchen table, and pay homage
to the marketing geniuses whose names are artfully hologrammed on the front.)
They've managed to peddle their services so effectively that they have more
than one billion cards in circulation -- four for every man, woman, and child.
On average, these folks carry a $5,800 balance on their cards from month
to month, paying an average 18.3% in interest. That amounts to $929.70 a
year in interest payments. We're talking $929.70 that won't even get you
a cheese pizza. Or pay for the phone call to order it.
How do those guys do it? Simple, they bank on the fact that the average everyday,
red-blooded, consuming adult isn't doing the math. After all, who in their
right mind would pay 18% interest on every purchase? And lenders keep you
by extending lines of credit, reducing minimum payment requirements, and
inching up the interest rate.
But you, Fool, are not average. You understand the golden rules of plastic
use -- pay off your cards every month, don't spend what you don't have, budget
for the big items and emergencies.
Still, debt happens. Especially around the holidays. So herewith you'll find
some tips on helping you get a handle on it.
Some of the best advice on caring for and bearing plastic comes from Fools
on the message board. Tips From
Fools contains a sampling of their advice.
You can pay it down with determination and the good graces of a
few wealthy relatives. We offer
9 Ways to Pay it Back.
Since this forum launched, Fools have put finger to keyboard and sent
Fribbles about
the great plastic beast. We feature a few here.
And finally, visit the
credit
card message board where you'll find a no-holds-barred conversation on
various issuers, the rewards they offer, and the tactics they use to keep
you beholden to their money-making machines.
--Dayana Yochim (TMF School)
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