Financial Basics

The true cost of credit concerns everyone, as the result of the credit crunch affects us all on a global scale. Making use of credit may leave you up to your eyeballs in debt if you don’t understand how applied interest rates will affect you, or you default on payments for goods.The world pays a high price for the misuse of credit, in the form of job loses, property value issues, value of money, world trading and the emotional cost suffered.

The personal cost of credit

People use credit to buy items they can’t purchase out-right, A huge amount of financial transactions involve extended credit, as people have learned to live via handing over a plastic credit card rather than actual money. The true cost involved isn’t usually apparent at the start of a transaction, although all facts are generally visible.

Most individuals understand that when they use credit they will be charged a fee for doing so. The fee may come in the form of an interest rate applied to debt, or as an extra cost on top of this. The realisation that debt for an item can take years to pay back, as well as costing up to twice the amount of the actual price of the product or more, doesn’t usually strike consumers until long after the event.

Most consumers using credit cards don’t stop to contemplate the fact that the purchase of a new television could cost them thousands of dollars more than it’s actually worth. Or, that by the time they’ve fully paid for it, it may have worn out! A typical level of interest rate applied to purchases is about 14%. Take into consideration that a deal may be struck to pay for an item in small amounts for the next thirty years and the result is truly senseless.

The global cost of credit

The cost of borrowing money that can’t be paid back is colossal. You don’t have to be a genius to see that the credit crunch has caused businesses to go under, people to lose jobs, unemployment to soar and property prices to become unreal. The value of a countries money can either rise or fall due to credit problems experienced on a world wide scale. This means trading is affected big time, and the cost of everyday goods, from clothing to food, will also experience the backlash.

The emotional cost

Money is a major factor when it comes to couples arguing and marriages breaking up. Disagreements about debt and spending are often cited as the main reason for divorce. At the same time credit, which leads to debt for many people, can cause poverty, sadness, ill health and misery.

The true cost of credit is unbalanced. While credit can lead to healthy financial experiences when used wisely, it’s more likely to leave the majority of people wishing they had exercised more control over their economic future and happiness.