Credit Cards and Loans
by China Brooks
If you have to ask how much something costs, you can’t afford it. –J.P. Morgan
Get Rid of Credit Card Debt
If you haven't already, break the cycle of using credit card debt. If you can't use a credit card without paying it off in full every month, you shouldn't be using one at all. Once I maxed out a credit card to buy a car, ending in me paying so much interest that I could have bought two cars. That's just plain stupid, and as my friend Marcus says, “Stupid should hurt,” which believe me, it did. Now, I would just save up the money and then buy the car.
If you are late with a payment, your interest rate shoots up to 20% or more, and you are hit with tons of fees. That pair of jeans or bag of groceries you put on your credit card will end up costing you three times the original amount you bought them for; is that worth it to you? Overdraft fees and credit cards (late fees and raised interest rates) are how banks make money. Stop giving them power and paying them like a slave (wage slave - hamster in a wheel). Break the cycle, I did and you can do it too, it's liberating. Years ago I got in the habit of paying my credit card balance in full every month and now, I'm so fed up with the banking system that I don't use credit cards at all (I use my Visa/ATM card). If I want to buy something and I don't have the money in the bank then I have no business buying it with a credit card. Sometimes people use credit cards to get airline or UPS points, etc.. which is a great idea if you are in the habit of paying it off on time. Credit cards can improve your credit if you pay them off on time every month. And yes, they are great for travel and in case of emergency. However, a savings account is your best bet for covering unexpected expenses.
Loans and Debt are the Devil
If you are in debt then your first priority should be the get the hell (literally) out of it. Yes, I am talking about paying off your car, having zero balances on your credit cards, and owning your house free and clear. I'm not a big fan of debt. People complain about the economy (control of big banking) and then go out and borrow money from the banks, putting all the financial power in their hands. If you take a loan, keep in mind that you now work for the bank, period (modern slavery). The United States Federal Reserve is a privately owned corporation (owned by bankers) that currently do not have our best interest at heart - they want us in debt.
I would rather have three jobs than ever take another loan again (knock on wood) - unless I am certain I can pay it off immediately. I would still use credit for good debt (investing in a business, education, and/or high ROI coaching). For the most part, I think loans are for lazy people, and I speak from personal experience. Instead of working my ass off and making a plan of action to get what I wanted, I used to take loans. If you get a mortgage, you will end up paying the bank two or three times the original loan amount. Please do not ever use your house as an ATM! Don't take the equity out of your house for cash, or get an auto loan on a car that's already paid for.
Know the truth about loans before you sign your life away. Steer clear of interest only loans and never take a loan that you don't really have the money to pay back (again, unless you have a kick ass business coach on your side showing you how to turn a serious profit). If a bank approves a loan for you on 'stated income', run (don't walk) away. Stated income loans usually mean you never had the money to make the monthly payments to begin with, otherwise the loan never would have been issued via 'stated income'. Lenders should be shot for ever offering the public loans on stated income.
Here's the thing, if you can't pay your loan one month (for any reason), you default. They start calling your work, your home, your neighbors (and family members), and they will take your home or car or whatever assets you own, they don't care about you and they're not your friend. Lenders have a saying, “You're only as good as your last payment.” Now a days, paying on time doesn't guarantee that creditors won't call your house. I have paid early for 5 years and I still started to receive 'reminder' phone calls.
Since the banks loaned money to people who didn't have any money to begin with (probably on stated income), people are defaulting left and right, leaving the banks desperate. Some banks have started to harass their current borrowers (people who pay on time, all the time) with 'reminder' calls well before the payment due date. They have pissed me off so much that I am beyond excited for the day I pay my loan off (my mortgage) and I will never take a loan from a big bank as long as I live! Fool me once, shame on you, fool me twice, shame on me. If I sound angry it's because I want to keep you from making the same mistakes I did, which will save you time, money, energy, and mental health.
Pay cash for everything - save your money. If you don't have the money for something simply don't buy it, you will thank me later. Also, be careful not to listen to every single piece of financial advice you hear, there are sharks (like the bankers) out there waiting to take your money from you.
For example, everyone seems to be a huge fan of the stock market but I was taught differently by my family. My Mom does not believe in the stock market because her friend's family (and my Grandma) remained abundant throughout the depression since they didn't put any money into the stock market. This stock market crash is not the first one the bankers have orchestrated and it won't be the last. The sharks will continue to try to part you from your money for generations to come - get used to it. They just did it again, in a effort to squeeze out the middle class which is why I am a huge fan of financial education especially for children. Our children will be will targeted and fall into the same traps that most of us did if we don't take a stand and educate ourselves. What changes can you start making in your life today that you can pass on to any children you know?
Is Good Credit Really That Important?
You get good credit by paying your bills on time. Having good credit can be useful; it can get you access to things that people with bad credit don't get. I am always the first one to get an apartment (they drool when they see my ass coming) because I have great credit. Right now, most people can't get a loan but I can; I can go out and buy a car, a TV, or a home on credit, all based on my fantastic credit score. The funny thing is, I would never do that, because I would rather pay cash.
A good credit score is a Catch 22. While it can help you, the messed up thing about credit is that the more money you owe (more credit lines you have open), the better your credit score will be. You can still be in debt up to your eyeballs and have good credit if you pay your bills on time. If I close my credit cards and pay off my loans, my credit score goes down because I don't have any credit lines open.