You Can Defeat Debt!
Eighty-three percent of American adults 20-49 report that their financial situation is very or somewhat stressful (USA Today, March 15, 2011). Ever wonder why trying to pay down your credit card balance seems you are bailing out a sinking boat? You’re not alone – “… almost four of every five employees say they live paycheck-to-paycheck, and 20 percent have missed payments on bills during the past year.” (Sacramento Business Journal, September 2, 2010)
To successfully defeat your debt you have to develop a game plan … and stick to it. Primerica will help you do that. First you need to understand how money works – something that is generally not taught in school.
Credit Can be Like Quick Sand
Do you make only minimum payments on your credit card balance? This can be a costly game. Depending upon the amount of your outstanding balance and on whether you are making addition purchases with your cards, making only minimum payments on your credit cards each month could add years to your payoff date.
Credit card debt is revolving debt – not a defined loan like a mortgage or a car loan. Those types of loans are “amortized” – they have a set schedule. You know how much you owe each month and you know when you’ll have the loans paid in full. Credit card debt is calculated, usually using an average daily balance. Since a minimum payment is just a percentage of what you owe and, because of interest, your total debt increases over time -- then your minimum payment is further eroded and can even increase. If you miss a payment, the credit card company will add a late fee – further increasing your balance. Credit cards are a great convenience, but if you don’t watch out, they can get you into financial trouble.
Credit's REAL Cost
Revolving debt is calculated monthly and it will be recalculated as you make additional purchases on the card. Installment loans differ from revolving debt in that your payments are figured on a fixed schedule. You know how much you borrowed and how many and what size payments you are required to make to pay back the loan. Even with a similar interest rate and monthly payment amount, your pay-off date will generally be much sooner than with a comparable revolving account.
This chart can help illustrate the difference:
