MortgagesUndressed

Reason 1: This is simple - when your balance goes over 20% of your approved credit lines your credit score will start to fall. The closer you get to tapping out your credit limits the greater the negative impact.

Reason 2: Money. Many people do not REALLY understand the impact of compound interest and the effect of an interest rate. The banks understand and prey on it.

What is the out of pocket cost to you from going to 9% to 18% on your balances? I have had many people say double. It is much more than double.The answer is not even close to correct. Way off. Wrongo. Horribly wrongo.

Paying twice the interest in fact cuts the time the bank doubles their money. WHAT DID I JUST SAY? (it in fact cuts the time the bank doubles their money)
Let me explain: If you secured a $10,000 second mortgage to pay off a $10,000 credit card you might pay around 9% interest. It isn’t hard to find people paying 18% interest on their credit cards.

So follow the money. If you were the bank and loaned money at 18% compound interest you would double your money in four years. If you loaned it at 9% it takes twice as long, 8 years to double your money.

Now, suppose you could do that for 16 years. (Some people always carry balances on their cards.) Using $10,000 doubles as follows in this example:
4 years = $20,000

8 years = $40,000

12 years = $80,000

16 years = $160,000

At 9% the 16 year profit is $40,000 profit - big difference wouldn’t you say?
Now you see why they love credit card balances and are impossible to deal with when you ask them to lower your rate.

It is their hope they can enslave you to balances on your cards.

You were born to be free, so set yourself free. Pay off those credit cards, even if it means a second mortgage. Larry Cragun