What’s the Real Cost of Your Credit Cards?

credit-cardsWe are a society steeped in consumerism and the idea of easy money. Credit cards are a symbol of our desire for instant gratification.

And this desire, and an unwillingness to save up for purchases and delay gratification until we have money, are taking their toll.

There are some very real credit card costs, and not all of them are related to money.

Financial Credit Card Costs

You are probably rather familiar with the financial costs that come with credit card debt. One of the biggest costs is interest. When you pay interest, you get nothing substantial in return. You do not get an experience, and you certainly do enjoy a tangible object.

Instead, you paying for the “privilege” of borrowing money. Your interest payment goes straight into someone else’s pocket. With credit cards, interest is often between 11.99% and 19.99%, with rates as high as 29.99% — or more. When you are paying that kind of interest, and only making minimum payments, it’s possible to pay back three or four times what you borrowed, and do it for years after the thing you couldn’t live without is long gone. And that’s before you add on all the potential fees for late payments, going over the limit, transferring balances, and other items the credit card company might charge you for.

Other credit card costs include the false sense of getting something for “free” through rewards programs. Many people get trapped into thinking they are getting a good deal if they spend money to get reward points for using their credit cards. While this might work if you actually pay off your balance each month (without accruing interest), for many it just serves as an excuse to buy more stuff with credit. It doesn’t take long for the interest and fees on these purchases to outstrip the value of the rewards you receive.

Emotional Credit Card Costs

There are additional costs to using credit cards. These are costs that you may not directly see in your pocketbook, but that can take their toll. First of all, relying on credit cards for most purchases encourages poor money habits, and that can get you into detrimental cycles long term, affecting your spending behaviors in a way that can be difficult to overcome.

Another emotional credit cards cost is the stress that comes with being in debt. When you are stressed about money, it is difficult to focus on the good things you enjoy, and it can be hard to derive pleasure from your daily activities. On top of that, the emotional stress that comes with credit card debt can affect your other relationships. Your time with your spouse, children or friends can be strained, and you may snap at them — even if you aren’t really angry at them. And, of course, credit card debt can make problems already present seem bigger than they are.

While credit cards can be great financial tools when used responsibly, and as part of an overall financial strategy that involves regularly paying off the balance, it is important to consider the costs. If you carry credit card debt, and develop habits that keep you in the credit debt cycle, you may soon find that the easy money associated with credit cards doesn’t actually make your life easier.

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