The Cost of Buying on Credit

Gosh, it’s so easy to slip that plastic card through the slot and get your hands on that product that you have wanted so badly but can’t afford. One swipe—and it’s done! You’re on your way to the massive concert, or wrapping your arms around the telly that will make your neighbours envious.

If you do it enough, you don’t even feel any guilt. You swipe and swipe and swipe, and just get a bill every month on which you can pay the minimum, a small fraction of your total cost. Nothing could be easier…or more untrue. Here are a few reminders and tips about the true cost of buying on credit:

•    Consider this perfect example of such credit costs: you buy a huge plasma television for £1,000. You pay just £25 per month for the wonder box, spreading out the cost over three-plus years. Do you realise that you can very easily end up paying more in interest than for the television? Here is a quick formula for this calculation—on a credit card with an 18% APR, you will pay 1.5% of your original balance every month in interest. Credit card companies calculate your minimal payment to be about 2% of what is on the card. In other words, every month that you pay the minimal balance, you are paying ¾ of it to interest, which will stretch your payments out over decades if that is all that  you are able to do. By that time, your telly will be long gone and you will still be paying for it.

•    If you are terrible at maths, there are many websites with loads of credit and debt management calculators that can figure out your true costs for purchases made on your card(s). On these sites, you can often click on the “minimal payment credit card calculator” to configure your total cost if you opt for minimum payments, how long it will take you to pay off the balance with such payments, and how different rates will affect your total costs. Click on to such sites to gauge just how expensive buying on credit can be.

•    Don’t forget the basic rule of using credit, as emergency funds after a crisis, such as an accident or unexpected illness. Otherwise, pay your bill in full each month, using credit as simply an advance of a couple of weeks before your next paycheck. If you are already in debt, do your best to pay even a small amount over the minimum balance. This simple step can save you thousands of pounds.

If you are in major debt and don’t think that you can find a way out, don’t despair! Many excellent organisations are available to intercede for you and to perhaps even erase part of your debt. For help, visit Consumer Finance Claims and begin to attack your debt with vigor. Consumer Finance Claims can also help with PPI Claims and other forms of financial hardship that you have perhaps encountered.