Millions of American carry credit card balances every month because they are unable to pay off the balances in full. The latest G-19 report from the Federal Reserve for March, 2011 reported that consumers owed approximately 796 billion on revolving credit card debt. This is a great deal if you are the banks and credit card companies who collect the millions of dollars in interest every month. However, for the millions of families making these payments it is consuming their lives and their personal finances.
Have you ever stopped to consider the true cost of carrying balances on your credit cards? I hope you will take a moment to click on the Federal Reserve Credit Card Calculator and input your information to see the true cost of carrying a credit card balance. It is an eye opening exercise. Here is a link to their site http://www.federalreserve.gov/creditcardcalculator/
The credit card calculator only reveals half of the story. The credit calculator only shows you the costs of carrying balances on your credit card. Unfortunately, it does not illustrate the other half of the story.
The other half of the story is the lost financial growth that could have occurred if you had invested the money. Why? Because the power of interest can also work for you just like it works for the banks and credit card companies. Once you understand the power of the compounding effect of interest, you will never want to pay interest again.
There is an anonymous money quote that states “those who understand interest earn it, and those who don’t understand interest pay it.”
Here is a link to a great free online investment calculator with graphs by Fidelity Investments. Take a few minutes to enter some information to see the impact of interest working for you. To see the difference or both sides of the story, enter your current outstanding credit card debt and monthly payments as an investment.
I hope this article has inspired you to start working on paying down or paying off your credit cards. More importantly, I hope is has inspired you to start saving and investing your money so you start earning interest and building your financial security.
Do you know someone that might benefit from this article? If so, please forward this article to them.
I hope you will follow Fiscal Literacy on Twitter, Facebook or sign up for our free personal finance, news & updates.
Copyright © 2011 FiscalLiteracy.com, All Rights Reserved
Please take the time to click on Twitter or Facebook link and share this article or leave a comment. Thank You!