In some ways, credit cards are a good thing. Credit cards help us pay for things when we are low on cash, or pay for an unexpected expense. Using credit cards properly also helps us build our credit history and increase our credit score. A strong credit score helps us get lower interest rates when we got to buy a car or house.
But banks and retailers have become very aggressive at
getting us to use our credit cards for more and more expenses. If we don’t pay off our balance on time, they
charge us interest, and if we miss a payment they charge us late fees. Both of which are good for the banks and
retailers, but bad for the consumer.
According to Debt.org:
More than 189 million Americans have credit cards
The average credit card holder has 4 cards
Each household carries an average of $8,398 in credit card debt
But for those that don’t pay off their credit card bill each month, the average credit card debt is $15,609.
Did You Know?
If you have $10,000 of credit card debt and your bank charges 20% interest, if you make the minimum payment, it will take you 235 months (almost 20 years) to pay off your $10,000 balance. During that time, you will pay $11,851.52 in interest.
But if your interest rate is 10% it will take 153 months and you will pay $3,672.54 in interest.
Budget Game Tip: For the purposes of this budgeting game, your credit score will only go up if you USE your credit card each month. It will go up more if you fully pay off your credit card before the bill due date.
Facts About Your Credit Card
Your credit card has an interest rate of 20%, which works out to 0.05% per day.
You are only charged interest if you do not fully pay off your credit card by the bill due date.
The interest charged is based on the ENTIRE outstanding amount, not just what was due for this bill.
Now that you know a bit more about your credit card, close this window to continue the game!