Credit Cards - a Powerful Wealth Tool

In fact, when used properly, credit cards are a veryspend millions of dollars in advertising to hook you on
powerful wealth-building tool! I use credit cards forusing their card? They know that there are many
every single possible purchase.consumers out there who just pay the minimum sum
By using credit cards you get...every month (about 3% of the total debt you owe),
1) A two-months interest free loanbecause it is so tempting. What's worse is that many
When you buy a product using your credit card, youcredit card owners don't even pay their minimum
will only be billed for it at the end of the month. Yousum on time because of a cash crunch or because
are then given another month to make payment. So,they plain forgot.
if you pay off your total bill, you would haveThe moment you pay only the minimum sum and
effectively gotten a two-month interest free loan.allow your outstanding balance to roll, you become
2) Bonus points and dollarsthe bank's best friend. This is when they will make a
Each purchase you make on your credit card(s) willkilling off you! Why? This is because banks charge a
earn you bonus points which you can use to redeem2% per month interest on your outstanding sum. This
for free products and services like extra flyer -milesmay seem small, but again, that's 24% interest a
and dining vouchers, saving you even more money.year. Just how much interest does this add up to?
3) A monthly statement that tracks and consolidatesLet's do the sums...
all your expensesQuestion: Imagine if you had an outstanding balance
At the end of every month, the credit card companyof $2,000 on your credit card statement, and you
will tabulate for you the total expenses for thejust pay the minimum sum of $60, how long will it
month, making it easy for you to track your totaltake for you to pay off the while balance? (this is
expenditure. So it becomes a free moneyonly assuming you do not charge a single dollar
management tool.more).
However, you MUST ALWAYS PAY THEThe shocking answer: It will take you 4.5 years! You
OUTSTANDING BALANCE when you pay the fullwould have paid a total of $3,300, that's $1,300 in
balance every month. This way, the bank does notinterest. In other words, you would pay an actual
earn a cent off you, but you get the three greatinterest rate of 65% off your balance.
wealth building services mentioned above. This isSo when used properly credit cards can greatly assist
what I do and that is why my bankers hate me.you in creating wealth or it can destroy you if
So why do banks go all out, giving freebies andabused.