Credit cards can be terrific tools when used wisely. They can make acquiring things we need to do business with easier. They can also come in handy in emergency situations in which we encounter an unexpected expense. However, there’s a nasty flipside to credit cards too.
Here’s why you should pay off your credit card debt:
High Interest Rates
Regardless of how good a deal you got on your credit card, there are many less expensive ways to borrow money. With that said, none of them come with the convenience of pulling out a card and saying, “Charge it.” Of course, along with that expedience comes a higher interest rate.
As of this writing, the average credit card interest rate is nearly 21%. Moreover, credit card interest compounds upon itself. At the end of each month, an interest charge is added to the outstanding balance, which then becomes a component of that balance.
In other words, card issuers can charge interest on interest charges. That’s how credit card debt can spin out of control so easily. The only way to avoid this is to pay off your balance in full each month.
A More Secure Future
Buying things with credit cards, then carrying the balance from month to month, prioritizes instant gratification over long-term security. Why? The money you spend on interest payments each month could be invested in something that will provide you with a monetary return down the road.
This is why credit cards issuers permit minimum payments. The longer they can keep you paying, the more they make off you. Ironically, while they’re called “minimum payments,” the reality is they are maximum payments because they’re designed to extract the maximum amount of money from you.
Gain Control of Your Life
Every decision you make is colored by your responsibilities when you have debt. How many times have you thought it’d be nice to take a few days off, but then realize you can’t afford to do so because it’ll mean less money with which to meet your financial obligations?
Where you live, what job(s) you take, even what you eat and how you sleep can all be driven by the need to live up to your financial commitments. Meanwhile, people who live debt free can pretty much do whatever they want, whenever they want — however they want.
A similar reason to pay off your credit card debt is the wear and tear on your nervous system it can cause. This is particularly true should you find yourself in a situation in which debt has gotten out of control. You’ll gain a whole new appreciation for the importance of debt relief if your bills take over your life.
The Lessons Your Children Learn
In far too many cases, children who grow up in households in which debt is considered a norm live with debt as adults. In other words, the debtor mentality gets passed down from generation to generation.
Remember, children learn by watching what we do, more so than heeding what we say. It’s hard to convince your kids of the merits of a debt-free life if they see you using credit cards to buy everything. This is especially true if they don’t also see you struggling to pay the resulting bills each month.
These are but four of many reasons why you should pay off your credit card debt as soon as possible. You’ll save money in the long run, have a more secure future, take control of your life and most importantly — help your children enjoy a better future.