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Credit Card Industry SecretsIf you carry a balance on any of your credit cards, the most important concept to understand is the principle of compound interest. This, along with late fees, over the limit fees and miscellaneous fees is how credit card companies make their money.For example, if you use your credit card to purchase a $50.00 pair of blue jeans and then only pay the minimum payment month after month. It could take you up to 82 months to pay off a $50.00 pair of blue jeans. Lets take a look at some credit card industry facts for last year: Credit Card CulpritsThese figures are the result of basically two culprits, over spending and compound interest. Over spending is the result of necessity (lack of available cash for daily living expenses) and desire (also the lack of available cash, but not for necessity). Compound interest is the interest that is earned on interest. All credit card companies structure their payment terms with compound interest. In essence, they ensure that if you pay your minimum required payment, it could take as long as thirty years to pay off the balance. More Credit Card TroublesIf you look at credit card debt on a slightly larger scale than the above example, you will see some more astonishing facts. The average family owes more than $5,000 on their credit cards. At an average rate of 15%-16%, that equals an interest payment of approximately $800-$900 a year. If the same $800-$900 was instead invested every year, in 30 years it could total over $100,000. A Way Out of the Credit Card TrapCredit card companies want you to keep investing in their future. It's how they make their money. In order to break the cycle and begin investing in your future, consider some of our free credit card reduction and debt-free techniques. |
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