A credit card can be a helpful tool, or it could break the bank. Kind of like some heavy construction equipment. It has a purpose, but if you don't handle it properly you can really hurt your financial future.
Today's money tip is about interest.
What is interest? If you have a high interest rate on your credit card you could end up paying a whole lot more than you expected. An interest rate is the cost that is charged for borrowing money.
For example: If you have a balance of $500 on your credit card with an interest rate of 10% and only make minimum monthly payments, of $20 for 40 months, that $500 you spent could easily turn into $588.22. But if the interest rate is 20% that $500 can turn into $735.90! (if you make minimum payments of $20 for 50 months.) WOW, that's a lot of interest.
Before you sign the dotted line, and swipe that credit card, make sure you have a full understanding of the interest on the card and you are prepared to make monthly payments that are more than the minimum expected. The faster you pay it off, the less it will cost you.
Keeping it Fresh, Young & Free,