I was introduced to a bank account at 12 years old. At the age of 14 ½ years old, I began actively using it to save and mostly spent the earnings I would receive from working as a Subway Sandwich artist.
Then in 2010 I signed up for my first credit card during my 2nd year of college.
I was warned (well borderline scolded) by the older adults in my life to be extremely diligent about paying your minimum balance on time as to not collect a late fee or tarnish your credit score.
I was told that the interest of a bad credit card was 19.99% interest.
So, you could imagine to my surprise when I found out my classmate admitted to our class that he had a credit card that he had ran up to 29.99% interest. Reason was because of chronically paying his bill late or not in full. It would be hard to get out of this cycle since he didn't have much money left after paying rent and his living expenses white attending school and working part-time.
Being poor is beyond expensive when you need to pay for needs vs another need with no wiggle room for wants.
So...
What is credit card interest?
Your credit card interest is expressed as your apr (annual percentage rate) and is the price your pay for the privilege of borrowing money.
The privilege to spend resources today that would have taken you time to save up. If the shoe were on the other foot you would (or should) be charging interest on the money someone borrows from you because it is the exchange of you giving up your buying power in the time being.
So, how it works is credit card interest is only charged on the amount you owe at the end of each month.
A person who is not in poverty will easily pay off the balance and live their best life. While a person in poverty will carry a balance and incur interest.
You see it?
Just carrying a balance comes with incurring extra fees.
Your charges depend on the types of charges you add onto your credit card. Like doing a cash advance transaction or a balance transfer or late fee.
Don’t be surprised to see that you’re going to be paying a higher rate of interest and other agreed fees compared to a simple tap or swipe for a basic purchase.
Please as a word of advice read the fine print of your credit card contact to see if your credit cards interest rate involves variable interest.
It means that the apr of your card will change with the prime rate.
Prime rate just means the interest rate that is sent by your lender which usually starts a few points higher than the federal funds rate, set by the Bank of Canada.
If that rate goes up, your credit card rate will also go up too.
So,
keep that in mind when you're using your credit card.
CONCLUSION
- I am hoping this information allowed for you to make better decisions about how you use your credit card by living a more frugal lifestyle and cutting down on your overall expenses.
By doing that you won't need to rely so heavily on your credit card month to month.
- As always, I wish you the best while on your destination for a better life.
- Articulate Tee
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