But, you say, my balance is low, and with this purchase, it will only be $1,000. I can pay that off in no time!

Well, if you enter the Twilight Zone and never again use the card for any purchases, are never late, and go over your credit limit, you can pay off the card by making minimum payments. Itll only take a little under five years! Just fifty-eight short months of your life, costing you $154.48 in interest charges, that is, if your card rate is only six percent.

But what about higher rates? Generally, the higher the interest rate, the more you pay and the longer it takes to pay off the card.

But what about higher rates? Generally, the higher the interest rate, the more you pay and the longer it takes to pay off the card.

Everybody knows that, you argue. Everybody uses credit. Well, true, nearly everybody uses credit, because it seems like were not really spending our money, but someone elses. Plastic is deceptive.

Most folks do make impulse buys, rationalizing that they can pay off their card balance in a short time. But life happens to the best repayment plans. Think youll never get sick, fired, laid off or downsized? Do you drive a forever car that will never need major repairs? Think again. And when these things happen, the minimum payment beckons like a shining solution.

But is it?

Hardly. Lets say that you had several cards, all having a $1,000 balance at different interest rates. Note the long repayment times, assuming, unrealistically, that you never make another purchase with any of these again. Check the chart for repayment times and interest rates.

Rate Months Years Interest
9%   63     5.8   $258.46
12%  69     5.75  $389.16
15%  79     6.58  $579.48
18%  99     8.25  $987.05
24%  426    35.50 $7,521.85

By the time you zero out a card with 18% interest, the going rate today, youve added more than 50% of the total you spent on the purchase in interest charges during the eight plus years it took to repay.

So what, you got a low rate? Perhaps you were offered a low rate of six or nine percent during a card issuers promotional period. Naturally you used the card to charge items until you reached your set credit limit. After a specified period, maybe six months, that promotional rate will end and your interest rate will increase to 12% or more.

And heaven help you if you incur any late charges. This year almost all credit card companies have raised their late fees to $35 from $29 in 2004. But thats not all they will do. If youre late on any card that you use, expect to see that rate increase dramatically. Up to 24% or higher depending upon the area in which you live. Unbelievable? It can happen faster than you can blink.

Unsecured cards are bad enough. Secured cards targeting those with credit problems are worse, usually starting at 24%! Add late, overlimit and credit line increase fees, and you can see what a masterful trap credit can be. All of the fees add up quickly and interest is charged on everything.

So before you reach for your card and make that impulse buy, think again. Pay cash. Cash makes you live within your means. Buy when stuff is on sale. Avoid the minimums. If you use credit, pay amounts above the minimum to shorten your repayment time and lower your costs. For more credit repair tips, please visit us at Helpful Home Ideas.