If you investigate carefully into some of the most common individual, corporate and government problems today, you will find that many of them are centered on debt. Too much debt! The story is the same, the banks offer “free money” to buy anything you want and improve your lifestyle. Most people don’t read the fine print and think about how expensive credit is in the long run.
The banks have most of the power in credit arrangements. They might start you out with a low “teaser rate,” but at any time, they can increase that to 20% or higher. When you think about the details, it becomes clear why you should never buy anything on credit.
1. Usury Laws
Debt has been a problem for a long time. Ancient Greece borrowed money from the temples and could not pay it back. Just like today, Greece defaulted.
Many religions warn against usury. Governments pass usury laws restricting the amount of interest that can be charged on various loans. Unfortunately, many payday loan stores and financial institutions have skirted these sensible usury laws.
Think about an average 20% interest rate on your credit cards. In order to finance that debt, you would need to have your income increase by 20%. When was the last time you got a 20% raise at your job?
2. Compound Interest Accumulates Quickly
Financial success is a process that has basically followed the same pattern throughout history. You work hard, save money and then purchase those items that you can afford. It is like a flower growing.
If you try to change the natural process, then it can lead to bad consequences. Nothing is free. When you “live beyond your means in the short-term,” you place a great deal of stress on your long-term financial health.
3. With Cash There are No Worries
When you have the cash in your hands, you buy the item. It belongs to you. There are no further concerns. You save money on interest payments.
Buying on credit is an endless “run-around.” You never really own it until you pay it off. Who wants that hassle? Plus, compound interest can lead to you paying for merchandise many times over. You are throwing money down the toilet with most credit arrangements.
Sit down and look at your income in a different way and it will become all too clear why you should never buy anything on credit. Figure out your lifetime income: yearly salary times years worked. That is your total income. With cash, you are more efficient with this amount. With credit, you are “overpaying” for products and services.
4. Debt Is Stress
Paying with cash-on-hand enables you to save and invest. With debt, the money is already allocated to some future repayment. You have more control over your life when you pay with cash.
Debt can lead to many personal and professional problems. When debt collectors start calling, it can be a nightmare. Free yourself from any of these dreadful miseries by avoiding the dangers of misused credit.