Having high cost debt is enough to financially cripple anybody. Sure, you’d like to upgrade from the iPhone 5 to the new iPhone 6 Plus, but do you need it? Probably not. I’d enjoy Met season tickets, but do I need them? Not in the slightest. In addition to not needing certain things, not being able to afford them is also an issue.
Being able to afford something means with your own money, not with a credit card. Sometimes people fail to separate those two in their mind. When you use a credit card, you’re paying somebody else for the ability to buy whatever it is you want. There’s a cost involved with that, and it’s typically a substantial one.
Kris Venne from Ritholtz Wealth Management wrote a post about high cost debt today. He specifically discussed a “student credit card” offer his daughter received in the mail. Being a recent college graduate, I’m not unfamiliar with these offers. By “not unfamiliar” I mean that I get no less than three of these a week in the mail. Credit companies are heavily targeting the student and recent student demographics.
Kris summed up his post saying:
“Accumulating high cost debt when you are young is an all around bad move. It’s the wrong thing to do at any age, but like investing the impact is compounded with time. My advice, no matter how tempting that new laptop is – it’s not worth 29.9% per annum interest.”
No matter what age you are, do your best to avoid high cost debt. If you have kids, please teach them the danger involved with these 30% APR credit cards.