USTaxTips.net
US Tax and
Financial Information
  Credit Cards  

USTaxTips.net does not research or endorse any product   or service appearing in ads on this site.  Before making a major financial decision you  should consult a qualified professional.

Bookmark and Share
 

Home
Site Map
What's New
Glossary
Calculators
Free in 30!
Personal Tax
Tax Rates
Save Money
Resources
Contact / About Us



Save Money   ->   Credit Cards and Compound Interest

Credit Cards 
     - How Compound Interest Can Work Against You

The use of credit cards would be an example of how someone can easily get into financial trouble.  If the balance of your credit card is paid off completely by the due date each month, there is no problem, because there is no interest charged.

If you only make a partial payment (such as the minimum payment due), the credit card company goes back to the purchase date to start charging you interest.  Credit card interest rates are very high, so the balance owing can increase quickly.  If you fall behind in your monthly payments, you will be paying interest on your interest.

Once you get to this point, you are in serious financial difficulty, and you should take steps to correct the situation immediately.  If you don't act quickly, your situation just gets worse and worse.  Some remedies:

    - immediately stop spending on non-necessities

    - stop using credit cards

    - if the credit card debt cannot be paid off soon, get a bank loan (if possible) at a lower interest rate, and pay it off as fast as possible.

Sometimes credit card companies will offer clients the opportunity to skip a monthly payment.  However, they will continue to charge you high interest rates during this time.  Do not skip a payment.

Use our Loan Calculator to see how much faster you can pay off your credit card debt by increasing your monthly payment.

For information on what to consider when deciding which credit card is right for you, see the Federal Reserve Board information on Credit Card Agreements and Surveys.

Tip:  Pay off the balance of your credit card each and every month.  If you cannot do this, you are in financial difficulty, because you cannot afford what you are buying, and you are paying high interest rates on your purchases.

Revised: September 09, 2017

Copyright 2008 - 2017 Boat Harbour Holdings Ltd.   See Reproduction of information on USTaxTips.net

The information on this site is not intended to be a substitute for professional advice.  Each person's situation differs, and a professional advisor can assist you in using the information on this web site to your best advantage.
Please see our legal disclaimer regarding the use of information on our site, and our Privacy Policy regarding information that may be collected from visitors to our site.