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Credit card and
students: Card disadvantages
Apr.
17, 2006
12:00 AM
Credit-card disadvantages
Way too tempting
Whipping out a piece of plastic is so easy. It doesn't even feel like
you're spending money. Do that enough times in a month, and surprise!
Look at that balance. Where did it come from? It came from all those
not-so-big purchases you made over the month:
• That pair of shoes you just couldn't pass up - $79.
• The night you were dying for pizza after you'd gone rock climbing -
$24.
• The great sale on baseball stuff - $65.
• Those two new CDs that you just couldn't live without - $29.
Suddenly you're in debt. And you don't have the $197 So you pay $60,
all you can afford. What happens next month? The $60 you paid the
credit-card company has made you short on cash this month - so you
charge more, and your debt grows larger.
Hard
to get out of debt
So what's it like to be in debt? Let's say that you find the perfect
winter jacket. It's marked down from $220 to $180. That's a $40
savings. You don't have the $180 right now, but you hate to pass up
the sale, so you charge the jacket. You decide to pay for it over
time.
Because you work only one day a week, you can't afford large monthly
payments. But you can pay $15 every month and still have some money
left over for other things. You faithfully pay the $15 each month, but
the months seem to drag on forever. Plus, you pay late once, and
you're charged a $30 penalty fee for missing the payment date.
Although you've bought the winter jacket in November, it takes you 16
months (that's two winters, a summer, and a spring) to pay off the
purchase. At a 17.9 percent interest rate and with a $30 penalty fee,
guess how much you paid for that "sale" jacket? $228.26. That's more
than the original price.
Source: themint.org
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