Take a guess. In my view, carrying credit card balances in excess of a nominal amount is financial cancer to your future. Why so? It is simple. You end up paying interest for years and years on your credit cards – and if you did not have the credit card debt, that money could be put away, tax deferred in an IRA or 401k.
So how can something so bad, be good for the economy? Here is why: Consumer spending drives the economy and creates job. As people increase their consumer credit card debt, spending increases GNP and jobs are created. Take it from me, however, it is not your job to grow the U.S. economy – it is your responsibility to look after you and your family!
Why talk about this now? Well, we are about to embark on the Holiday shopping spree so people are polishing off their VISAs and MasterCards and getting ready to “charge it!” According to the Wall Street Journal (Thursday, October 9th) a 4% increase in sales is predicted by the ICSC (International Council of Shopping Centers). I wonder if they ever predicted a decline in holiday sales!
So the bad side should be obvious. If you saddle yourself with credit card debt and pay 20% interest for endless years – you may keep your credit score, but when you turn 75, how much money will you have in the bank to supplement your social security? Every day, I encounter seniors who have made the awful mistake of taking their IRA funds and using to them to pay on their credit cards. When they see me, the IRA is gone and the credit card debt is still there. THAT IS INSANE. You can keep your IRA and protect it – in bankruptcy and without bankruptcy – so you should NEVER use it to pay a credit card bill.
When you turn 75, would you prefer to boast about your credit score being over 700 your entire life and have $4,000 in the bank, or would it be better if you let your credit score dip to 600 for a year or so and at 75 you have $600,000+ in the bank? How do you accomplish this? It’s easy – we make a shift so that we are paying the money to your savings account and not to credit card interest.
My suggestion? Start thinking about this right away. If you’re knee bent on spending this holiday season – and you have to charge – use your Bank of America and Chase cards first (I’m not going to tell you why). If after the holidays you have second thoughts about paying 20% interest for the next 20-30 years, then give yourself the greatest gift you can – schedule a free consultation with us and we’ll explain to you how we can get rid of that credit card debt.
Enjoy the weekend and be sure to listen in on Saturdays from 8:30 to 10 AM on WDFN 1130 AM – on iHeart at CLICK HERE!– and watch the show on TV 20 on Sundays at 11 AM. Law and Reality is not just information – it’s entertainment!