Yesterday, I forgot to pay my credit card, so this morning I ran across to Royal Bank to make my payment. Because there’s a fine for late payments. I have know idea how much the fine is. Personally I donâ€™t want to know 🙂 After opening a Business Account with the bank I got a pre-approved credit card. But one thing I have learned over the years is to NEVER run a credit card balance, the interest will kill you. If youâ€™re only making those minimum payments, then not only can you not deduct the interest on credit card but you have to pay it with after tax dollars. What does that mean; the 18% or whatever percent you are paying annually now become high a 36% internet.
Many of my friends say just not use credit card period. In my opinion this is poor advice. There are proper use of credit, and knowing the proper use can be a powerful thing. Itâ€™s just a matter of knowing the difference between good debts and bad debts. If youâ€™re the kind of person who always pays cash for everything or donâ€™t buy anything unless you have the cash in the bank then getting a credit is a good thing. Just make sure to get the right credit card. There are lots of banks offering credit cards with different rewards e.g. cash back or frequently flyer miles. Unfortunately, my card doesnâ€™t have any rewards. But my friend Glenn uses Visa that gives him 1% cash back on all purchases he makes. And seeing Glenn pays off his Visa every month he is really making money off it. If he running was an interest balance then it would kill any income made from the 1% cash back.
One of the worst things anyone can do is fall into credit Card debt trap because it can take you years to get out or maybe a lifetime. Some people never do get out. Its start off easy you charge here, a charge there, etc. And you always say that youâ€™ll pay it off when the bill comes. However that doesnâ€™t always happen and then you charge some more until you arrive to a point where you cannot pay-off the balance. So you start making minimum payments and keep charging â€“ because itâ€™s easy. 🙂 Oh, one more thing. As you approach your limit, the bank increase your credit limit so you can, you guess right ❗ charge some more. It took me years to get out of credit Card debt. Please donâ€™t let it happen to you.