We have a tendency to laugh at the old myths and legends of the past. We find it hard to believe that people could be so ignorant as to believe that the world was flat and that women who healed people with herbs were witches who were in league with the devil. Fortunately we now know that if a doctor gives you a drug that makes you well then it doesn’t mean you are infected by the devil and if you travel around the world you won’t fall over the edge of the world.

So what will historians of the future make of some of our own current myths and legends? We have been encouraged to think that credit cards allow us to buy more things and lead a better life. In the short term this may be true. In the longer term it is a total lie.

Fact. When you get your first credit card your possible spending facility is much higher.
Fact. Once you have a regular carry-over balance your spending power is reduced.

Why is this? It’s really very simple, Interest. Once you accept that you must pay interest then you are paying out more money from your income than you did before. The money you pay out for interest is gone from your income and you don’t have the option to spend or save it any more.

Everything you buy on a credit card costs you more than if you paid cash. It costs you more than the ticket price when you bought it.
For an example let’s say you buy a new couch for 1,000. You plan to pay it off over 12 months and we’ll assume that the interest on your credit card is 1.5% per month. (It could be a little less but could also be double this figure) So you divide 1,000 by 12 to get your monthly payment. Let’s see how it works out.

Month Balance Interest Repayment
1 Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 1000Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 15Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 83.33
2Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 931.67Ã’Â Ã’Â 13.98Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 83.33
3Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 862.31 Ã’Â 12.93 Ã’Â Ã’Â Ã’Â Ã’Â 83.33
4Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 791.91Ã’Â Ã’Â 11.88 Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 83.33
5Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 720.45Ã’Â Ã’Â 10.81 Ã’Â Ã’Â Ã’Â Ã’Â 83.33
6Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 647.93Ã’Â Ã’Â Ã’Â 9.72 Ã’Â Ã’Â Ã’Â Ã’Â 83.33
7Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 574.31Ã’Â Ã’Â Ã’Â Ã’Â 8.61 Ã’Â Ã’Â Ã’Â Ã’Â 83.33
8Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 499.6Ã’Â Ã’Â Ã’Â Ã’Â 7.49 Ã’Â Ã’Â Ã’Â Ã’Â 83.33
9Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 423.76Ã’Â Ã’Â Ã’Â 6.36 Ã’Â Ã’Â Ã’Â Ã’Â 83.33
10 Ã’Â Ã’Â Ã’Â Ã’Â 346.78Ã’Â Ã’Â Ã’Â 5.2Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 83.33
11 Ã’Â Ã’Â Ã’Â Ã’Â 268.65 Ã’Â Ã’Â 4.03 Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 83.33
12Ã’Â Ã’Â Ã’Â Ã’Â 189.34Ã’Â Ã’Â Ã’Â 2.84Ã’Â Ã’Â Ã’Â Ã’Â 83.33
—Ã’Â Ã’Â Ã’Â ———-Ã’Â ——- Ã’Â Ã’Â ——–
Totals=>Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 108.85Ã’Â Ã’Â Ã’Â Ã’Â Ã’Â 1000

Balance remaining=108.85

Hang on! Didn’t we divide the purchase price by 12 to get the monthly payments? Yes we did but we didn’t account for the interest charges. We still owe 108.85 which is all the interest. This will take us more than another month to pay off. So our 1,000 couch has cost us 1,108.85
This means that on just one item we have paid more than 10% more than the ticket price. That’s 108.85 that would have been our money in our pockets but now belongs to the credit card company. Just for a new couch.

If we had saved that 83.33 each month for one year we could buy it now for the real cost of 1,000. That extra 108.85 would go in our pockets and be available to spend as we wished. We would have the new couch AND 108.85 to spend!

Doesn’t that make you wonder how we have allowed ourselves to become brainwashed into the buy-it-now culture? You can have the buy-it-now way of life but it really costs you more. It means that in the long run you can afford to buy LESS because a part of your income goes to the credit card company.

If you only ever bought that couch on the credit card that wouldn’t be so bad but you don’t do you? You buy this, you buy that. Before you know it you have a significant balance on your credit card and half the time you are working is just to pay your credit card bills. You can’t afford to buy anything new any more.

Don’t fall into the bear-trap of credit cards. If you have them pay them off. If you don’t have them then stay off them. You will be better off and have more disposable money if you stay away from them. Say no, to credit cards.

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