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This should be simple: Purchase only what you can pay for. If you need a big-ticket item, then save up
the money until you can afford it. Buying more than you can afford results in a downward spiral of
increasing debt.
Let’s take a simple example:
▪ Purchase a $10,000 home entertainment system with your credit card.
▪ Your credit card has an APR (annual percentage rate) of 15 percent.
▪ You pay the minimum payment of 2 percent of the balance.
▪ Your first payment is $200, of which $125 goes to interest; only $75 goes to the
It will take almost seven years and close to $16,000 to pay off that $10,000 credit card purchase. You
will be paying 60 percent more for the home entertainment system than if you had paid cash! So, don’t
do it. Wait until you can afford it, and pay only the actual price for the entertainment system.
In addition, if you do decide to get one credit card, make sure you shop around for the best APR,
terms, and fees. Don’t be suckered into high interest rates because you’ll get freebies from your
favorite airline, hotel, or store. Those freebies will be costing you a pretty penny if you have a high
interest rate and/or high annual fees.
If you pay your entire credit card bill monthly, it will become a way of life. Once you do this, you
will never consider getting behind in your payments. You will truly enjoy the financial freedom and
stress-free life that doing so provides.

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