Credit card... Powerful wealth destroyer

Why do banks go all out, giving freebies and spend millions of dollars in advertising to hook u on using their card? They know that there are many consumers out there who just pay the minimum sum every month (about 3% of the total debt you owe), because it is so tempting. What's worst is that many credit card owners don't even pay their minimum sum on time because of a cash crunch or because they plain forget.

The moment you pay only the minimum sum and allow your outstanding balance to roll, you become the bank's best friend. This is when they will make a killing of you! Why? This is because banks charge a 2%+- per month interest on your outstanding sum. This may seem small, but again, that's 24% interest a year. Just how much interest does this add up to?

EXAMPLE : Imagine an outstanding balance of $2000 on your credit card statement, and you just pay the minimum sum of $60, how long will it take for you to pay off the whole balance? (assuming you do not charge a single dollar more)

THE SHOCKING ANSWER : It will take you 4.5 years! You would have paid a total of $3300, that's $1300 in interest. In other words you would pay an actual interest rate of 65% off your balance.

Adam Khoo - Singaporean self-made milionnaire by the age of 26


I have a friend who waste 7000 on credit card and ended up fail to pay back even the minimum amount. At last, bank advises him to convert the debt into personal loan. Shameful for a govt officer like him (educated?) who earn 3000++ per month. Being uneducated in financial matter is totally unacceptable.

Don't borrow to spend. (except for cars and houses).

No matter how much money you make, whether it's $2,000 per month or $200,000 per month, you can still create a financial crisis for yourself. If you have poor financial habits when you have a little money, you will carry those same poor financial habits with you when you have a lot of money.

REMEMBER, always pay the outstanding balance of your credit card every month. This way the bank won't get any of your cents. Don't let bank earn Warren Buffet returns (24%) off you!

How come eyh the 2000 debt become 3300 even though the interest is just 2%.!? Because the money COMPOUNDING. I'll write about this soon.

Credit card? Anyone? Hehe..