Wakeup Call...

For those who are considering using debt to make your next big ticket purchase, think again! Just found a video from the Financial Post, showing you just how much the cost of debt really is. The problem is, financial institutions/retailers will implement all these tricks like introductory rates, smaller minimum payments, and even tell you that you don't have to pay for the first X number of months just to make a sale. What they don't make obvious, is the fact that the interest on the principal you owe is being compounded and you're paying a lot more interest than you have to because of the smaller minimum payments! Those plans sound more attractive than they really are.

APR% rates are frequently advertised but most will not show you the effective annual rate nor the sample interest calculations. To demonstrate how costly these payment plans can be, here's a video with numbers:

http://www.youtube.com/watch?feature=player_embedded&v=FGCAKyuXR6A

We all use debt every now and then, in varying amounts...hopefully neither of us will ever have to use those ridiculous minimum payment plans! The only way I would say use it, is if you actually have the money to make the purchase immediately but you are choosing to borrow because you are fairly certain that you can make more with your investments than the interest you are paying.


-TT