The credit card companies create the illusion of paying less for an item by requiring only a portion of the balance to be paid as opposed to the full balance each month. The factual aspect of the illusion is that much more will be paid for the item due to the interest paid each month. See the results for yourself by adding the payments for the balance and the interest for each month. The total payments exceed the original purchase price. Notice the extra amount paid!

        A simple rule of thumb: if you can’t pay your credit card bills every month, then don't spend the money!

        A number of people you know may seem to have money to spend when you are sure their income does not match their spending. A reason is because credit cards allow for the illusion of additional income and prosperity. A number of people offset their lack of income by continuing to spend money causing a debt to be accrued because they want to have or do things that will make them happy no matter the cost! Having fun and enjoying life is a great outlook, but my concern is when you don't have that money to spend! Continually carrying a credit card balance is not a means to happiness, only continued despair resulting in a continual cycle requiring you to offset your grief by spending more to make you happy. People's view is that a payment of $50 a month for five years for a $2,300 dollar loan at 12% to pay for a vacation is a great deal. In the end though, they would have paid $3,000 for the loan. Another illusion people see is that when the balance drops to around $1000, they can spend/charge more. They will thus maintain the same debt payment. The result is spending more money towards a debt that could instead be used for a better quality of everyday life. Save/accrue the money before you spend it!

        Keep in mind: What did people do decades ago when credit cards were not around? They didn't spend the money because they didn't have it. The credit cards companies dangle the carrot in front of your face waiting for you to reach. Resist the temptation to control your expenses better.


Return to Credit Card Management Topics.