Don’t get hooked on debt!

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One of the so-called benefits from the economic downturn over the past few years has been that interest rates are at an all-time low. Of course, that may sound good if you can actually qualify to borrow money these days, with tougher standards for borrowers, from higher credit scores to larger down payments. But if you’re putting your money IN the bank, it’s definitely not good news, especially when you consider all of those darn fees!

In order for the economy to recover, of course, we all need to spend money on stuff – from houses to cars to flat panel TV’s to entertainment – each dollar we spend has a ripple effect on the broader economy. Here’s the problem: we don’t always live within our means. That means we want to buy something today and then pay for it in the future, generally at interest rates that mean it will take forever to pay off the debt. But since interest rates are low now, that may mean that we are more likely to hit that credit card and take advantage of a low price offer for something we’ve been waiting to buy.

A Yahoo article today featuring a Wall Street Journal story sums it up well. Of course, as the economy gathers steam (and it will) interest rates will begin to rise. Oops! Here we go again!

So how do we avoid the trap? Pretty simple, really. Credit cards are best used for convenience ONLY when you are able to pay off the balance monthly – period. Other than that, if you intend to carry a balance, it should only be for something truly unexpected, like an emergency. If you need to drive to work and your car breaks down, of course you have to get it fixed right now. Other than that, here’s a novel way to handle buying the things you really want.
A radical approach!

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