Hey, everyone, let’s talk about credit cards or more specifically the credit card interest we pay on any unpaid balances. This is a topic I’ve been putting off discussing for a while, but it’s time to talk. I’m going to give you my perspective on credit card interest.
Credit cards can be really useful, but there’s a “trap” many of us fall into: spending more than we actually have or make. And that’s where credit card interest on unpaid balances comes in. Banks and credit card companies call it “interest” but I think of it more as a Fine – a financial penalty for spending money you don’t have or haven’t earned yet.
Think about it. Your income is what you have available. When you swipe your credit card for something you can’t immediately pay for with your current earnings, you’re really borrowing against the future. So, the credit card company says “Hey, you spent more than you made, so you’re going to have to pay a little extra for that privilege.”
The interest you pay on that unpaid balance is the cost of overspending or as I would say an “Overspending Fine”.
Just like any other fine, this “overspending fine” can really add up. The more you overspend and the longer you take to pay it off, the more interest “fines” you’ll accumulate. It can trap you in a cycle where a chunk of your payments goes towards these penalties instead of actually reducing what you owe. All while increasing financial stress.
Thinking of interest as a “fine” for overspending should be a wake-up call. It shifts the focus from just another fee or number on the credit card statement to a direct result of our spending habits. Calling it a fine might sound harsh, but It highlights the consequence of not managing our credit responsibly. It’s not some abstract percentage, it’s real money coming out of our pockets!
So, how to avoid this overspending fine?
- Spend less than you earn! Create a budget and stick to it!
- If you do use your credit card, aim to pay off the full balance each month.
- Be mindful of your spending habits. Are you using your credit card to buy things you really don’t need?
- Addressing these habits can help you avoid overspending and the resulting “fines”.
And if you find yourself paying a fine each month what can you do? Commit to:
- Stop spending more than you earn! Create a budget and stick to it!
- Focus on aggressively paying down the unpaid balances to minimize future “overspending fines”.
- Consider strategies like balance transfers to lower your interest rates and reduce the fine amount while you pay down your debt.
- If you need help, find a qualified (preferably non-profit) credit counselor to help you develop a plan to get this debt paid off and get your spending habits back in order.
So, let’s change how we think about credit card interest. It’s not just a “cost of borrowing” it’s a fine for spending more than we’ve earned. By understanding this connection, we can become more conscious of our spending habits and take steps to avoid these unnecessary financial penalties.
What are your thoughts on this perspective? Does it change how you view credit card interest?
Let me know!
Planning for Retirement? My Plan!
When I was planning for retirement, the biggest variable in our and probably your expense category was/is the credit card expense. Like many people our age we don’t carry much cash, so nearly everything we buy goes on the credit card. (We don’t use debit cards, which I’ll discuss “why” in a future post.) Our credit card bill typically is our largest monthly expense. I knew in retirement, once we were on a fixed income, managing our use of credit cards would become very important. There certainly would not be room in our budget for interest expenses (fines) for unpaid balances.
Our plan is to fully pay our credit card bills each month and not pay any overspending fines. We will do our best not to spend more than our income but if something does come up, we are working to build up an emergency fund for these expenses. If for some reason our plan fails, I look at our paid off credit cards as a short term safety net while we adjust.
If you’re retired or getting ready for retirement and finding credit card expenses to be a problem I hope this article has been of some help. Now is not a time for wasteful spending. Overspending fines are wasteful and should be avoided. It’s not too late to change any bad spending habits you have but you must start today. Quit spending more than you earn and aggressively work to have no debt in retirement so you can fully enjoy your golden years
Thank you for taking time to read this article.
If you would like, please leave a comment below or you can email me at www.feedback@wewaonthenet.com.
I’m also starting a YouTube channel, www.youtube.com/@wewaonthenet where I will be discussing various retirement topics and topics I come across that I think may be of interest. Check it out!
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