A Straight Talk on Debt

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Open a Store Card and Save 10%

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It is almost impossible to purchase anything these days without hearing the phrase, “Would you like to open a store card and save 10%?”


We recently purchased some new furniture and were asked just that. As I reviewed he application I saw that the card had a 22% interest rate! Obviously, we opted out of the card and paid for the furniture with cash.


10% off, for a price?


The next day I decided to do the math on how much that furniture would have cost had we taken the bait of a 10% discount.


Total Price                          $2,025.00

Less 10% discount                $202.50

Amount Charged                $1,822.50


The monthly payment required to pay off the balance in twelve months would be $170.58. The total amount we would have paid to get the ten percent discount would be $2046.96! We would have paid $224.46 to save $202.50… not much of a savings is it?


How the stores win and you lose


This is how the stores and banks win. Now if we had been in a different position and did not have the ability to pay cash for the furniture, would we have applied for the card? The unfortunate answer is yes, we would have. We also would have worked to pay the balance off sooner than 12 months.


By paying $323.54 each month, the account would be paid in six months and we would have spent a total of $1,941.24. Still more than the original price but better than extending it for a year.


Don’t fall into the credit card trap


Some of you may be asking why we didn’t just charge it and then pay the full balance. If you have the discipline to do that, then by all means, take advantage of it. What I am afraid of is falling into the cycle of saying every month, “I’ll pay it off next month.” I have been down the road of credit card debt before and really don’t want to go back.


It is important to fully understand what the cost of the “savings” really is. Stores and banks both are in business to make money even though they may disguise it as a savings to the customer. Be sure to read everything before you fill out a credit application.


Rob Taylor   

Rob Taylor is a contributing author for A Straight Talk on Debt. Rob tells it like it is when it comes to the latest debt industry news and shares his advice on personal finance. 

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  • As I approach my "graduation" this summer from the DMP, I need to get a handle on this. Credit is NOT evil in and of itself. Credit is sometimes necessary; the trick is knowing the rules and having the discipline to use it sensibly. Fearing credit will

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