“Hey Dad, do you have a balance on your Credit Card?”

Absolutely not, kids:

I pay my credit card balance, IN FULL, every month.  More times than not, my credit card statement has a “$0” balance, as I usually send a payment to the credit card company as soon as the expense is posted to my account.  I rarely wait until the due date to pay off my credit card bill.  But it wasn’t always like that, but we’ll chat about that some other time.

I don’t typically receive credit card statements in the mail since they usually have a $0 balance, but recently I received a statement, which showed a $0 balance, but had a special note, in the envelope, indicating that my Annual Percentage Rate (APR) had increased to 27.15%.  “Wow, that’s a lot!”

The average American household now owes $7,951 in credit card debt, according to the most recent data available from the Federal Reserve Bank of New York and the U.S. Census Bureau.  Think about this.  Your bank pays you 0.04% interest on your savings account, to use your money, while charging you 27.15% interest on your credit card balance, to use their money.  In a single year, with that average household credit card balance, you could potentially be “giving” the bank over $1,000 of your hard-earned money in interest and get pennies in return, on your minimum required savings account balance.  “That’s just nuts!”

With credit card statements being posted online, many people have a tendency not to look over the whole thing.  They just want to know, “What’s the minimum payment and when is it due?”

You need to take a closer look at your Account Summary on your credit card statement.  Add the “Fees Charged” and “Interest Charged” together and ask yourself if you are okay with handing over that much of your money to the bank, to support the mortgage on their downtown skyscraper.  Yeah, that’s their house.  The one with their name on it, in lights.  There’s a reason why the Bank’s house is bigger than yours.  You’re paying for it.  Need a wake-up call?  Check out the Account Summary on your Year End credit card statements. See how much interest and fees you paid in 2021, 2022, and 2023.  Are you okay with those dollar amounts?

If you carry a balance on your credit card, check out the “Minimum Payment Warning” section on your credit card statement.  It will show you how long it will take you to pay off the balance, paying just the minimum monthly payment.  It will also show you how much money you will have paid in total once the balance is paid in full.  Stop giving your money away to the banks.  “It’s your money. You earned it”.

Anyone who pays off their credit card balance every month has mastered one of the critical financial freedom lessons and should feel pretty good about their accomplishment.       

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