Credit Card debt will tear us apart!
My incomplete credit card story!
Recently, I wanted to buy AirPods Pro which cost around Rs. 25,000 in India i.e $335. I didn’t have that money with me. So, I thought that why not take this product on EMI. Or, why not get a credit card so that I can just buy stuff when I don’t have money in my pocket. I went for the latter one- getting a credit card.
My thought was simple. I wanted to buy the AirPods at the very moment. And, when my salary credits in my account, I will pay the credit card bills. Simple as that! That time, my brain was working linearly.
get ’n’ amount from the bank, pay when the salary is credited
I was unaware of credit card debts and interest rates. I just thought the bank will offer money and we can give them in a specific period. If I can’t pay, they will give you notice and nothing else. I didn’t even know about the concepts of debts and interest rates.
Hence, I decided to take advice from my colleague who owns a credit card. I asked him- should I get a credit card or not? I had no idea what was about to come to me. And, the lava burst, and all I heard was trash about credit cards and their debts. I couldn’t believe it.
Credit Cards were supposed to be angels and not demons!
Browsing journey took off
I took over the internet and learned about credit card debts. Wikipedia said, “Credit card debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she has spent.”
Now, I was getting what it is. I thought that I will pay the bills in the grace period. Why would I be in any debt? I was positive! Then, I decided to watch credit card videos on youtube. And, this is how Youtube looked.
Why is everyone in a credit card debt?
Now, it was getting complicated. Even more than the TV series, DARK and I were “Jonas Kahnwald” who have no idea what is going on. I was in the cobweb of my thoughts- to get a credit card or not. I wanted to buy AirPods Pro with that, period!
I thought of the last attempt. So, I went to Google again and looked for facts about credit card debts. But, I only queried “credit card debt” and got haunting suggestions.
My heart was thumping after seeing this suggestion. But, I went for credit card statistics anyhow.
As per creditcards.com, the credit card debt hit $1.0645 trillion in April 2019. This is a humongous number. And, the numbers didn’t stop. Average debt was
$1,154 per card that doesn’t carry a balance
$4,192 per person, U.S. resident adults
$5,673 per U.S. adult with a credit card
$6,506 average balance on credit cards at the end of 2018, according to Experian.
And, these were the numbers I extracted from only one website and one country.
Debts and the snowball effect
Let’s say I buy AirPods Pro worth Rs. 25,000 on July 15. And, the bank’s grace period is 36 days and APR 40%.
When I will get my credit card statement on July 30. I will have to pay Rs. 25,000 by August 19 i.e the end of the grace period. If I don’t interest will hop onto the principal amount.
My APR is 40% of a year and for each day, it will be around 0.11%. It means Rs. 27.50 of interest each day. Suppose I pay this amount on August 31, I will have to pay Rs. 330 more. And, I am not counting other charges yet.
What if I pay the amount after a whole year?
I will have to pay Rs. 35,000! And, the sum will increase with other taxes. Hence, roughly 50% more of the product I want to buy. No way!
I got to know the credit card is a trap. Yes, it is a great help when you need money. But, mess up once and I would have to pay loads of interest. Not my cup of tea!
Therefore, I decided- no AirPods for now. All I need is happiness in my life right now. I don’t want to get under debts at 21 — Credit card, you can go find your prey somewhere else. Not happening here!
Summary
A credit card analogy sounded beautiful to me. I got it from Metamia and that sums up the whole story.
A seemingly bottomless pit of money for which you only have to refill with a handful of money each month. The bank takes a slightly smaller handful for its fee each month. If you keep to the banks plan you then you will have to put back over 100 times what you took!
References
Peace!
