Have you ever asked yourself why it is you have a credit card? Most folks like the sense of security a credit card offers. Those unexpected car repairs or maybe a trip to the emergency room when the little ones sprain their ankles at cheerleader or football practice aren’t so overwhelming when you know you have a back up plan for the financial aspect of it. Still, most Americans own a credit card because they spend more than what they bring home each week. It really is that simple.
Despite tough economic times, there is no shortage of available credit card offers, no matter your credit history. Some are designed to help those with lower scores improve their financial health while others are designed for those who like to travel the world. But do you really know how much that $70.00 dinner will eventually cost? Any idea on how long it takes to pay down $5,000 at 13% interest and $55 a month? For that matter, any idea on how much it’s eventually going to cost? You might be surprised to learn you’ll pay $13,254 using these dynamics. Not only that, but sticking to those same payments and assuming the balance doesn’t increase nor the interest rates, it will take you twenty years and one month to pay back that amount. Suddenly, that convenience is anything but when you take a look behind those easy payments.
First Things First
One of the first things you need to understand is why you’re spending; what your motives are for whipping out the American Express card. Are you overspending in areas you know you shouldn’t? Are you keeping your justifications in perspective? In other words, that handbag that’s “must-have” today is likely going to be the same one you deem a fashion faux pas next season. Is it really worth what that price tag says?
We all know the horror stories behind the foreclosures and adjustable rate mortgages. It could be you’re relying on your credit cards to keep the payments current. You’re not alone, but you do owe it to yourself and your family to better cover the bases. Keeping a roof over your head is top priority, but are those premium cable channels really going to affect your quality of life if you cancel them? Will the kids suffer greatly with the absence of nights out for dinner? It’s all about priorities.
Further, these tough questions will serve as a powerful message for those same kids: “Mom and Dad work hard, but there’s a big difference in what we need and what we want. These days, it’s all about coming together as a family and knocking out the frivolous expenses to ensure our futures.” That’s powerful – and and ideal opportunity to teach your little ones about responsibility.
Peace of Mind
Keeping your payments current is always important, but there’s a sense of pride and even peace that comes over us when we knock out a monthly bill. That open line of credit will allow you to sleep better at night, too. Knowing you have an emergency back up in the form of your credit card keeps you from worrying about emergencies, such as the need for the car to go to the mechanic. Plus, one less bill means one less worry, right?
If You’re Already in Trouble
Every financial expert in the industry will tell you if you’re in trouble with credit card balances, your first best thing you can do is contact your credit card company. No one wins if there’s no compromise. Your credit card company’s goal is to help you help yourself – and if that means coming to a workable payment agreement, you should work with your financial institution to make it happen.
It’s human nature to fear the unknown, but the thought of fearing a small plastic card in your wallet doesn’t have to exist. Play fair, cover the bases and keep your eye on the horizon – after all, that’s where those better financial times are. Nothing’s forever, but it can sure feel that way when your credit scores prevent you from landing a job or buying a home. Work to protect it and those fears can easily be kept at bay.