I see a lot of advice on this subreddit and elsewhere that you basically should not be taking out credit unless you can pay back the amount in full each month. Going by the general tone of topics I've read it sounds like a total deathtrap, like walking into the basement alone in a horror movie.
What I'm failing to understand here is why it's so bad to do split the repayments into a few smaller amounts?
Hypothetical example: you purchase something for $500 on your credit card. The APR is 20%. You decide that 2-3 repayments is easier to manage than one big one, so you aim to repay $250 each month. At this rate you'd pay back the card in 3 months and at the end of it the only extra you've had to pay is $12, right? That seems like not a big deal at all to me. Not for the purposes of making your cash flow less scary.
I understand the concept that if you'd just waited till you had the actual cash to buy it outright you would have saved yourself $12, but that seems like a pretty small deal to me. Is there more to it? Is it more of a case that this becomes a bad habit, because you psychologically get into the idea of living beyond your means? Or are there additional fees that I'm not aware of that accumulate over time?
I'm pretty ignorant with this whole topic so I apologise if I come across as argumentative, that's not my intention. I'm just trying to understand something I don't know much about, so thank in advance for any advice.
EDIT: Did some more calculations. if it was $2500 credit then that debt takes a year to repay and you accumulate $240 in interest. Not such small potatoes anymore.
So I'm guessing the problems is that it can snowball/grow exponentially really easily?
Submitted May 13, 2018 at 09:30AM by MetAGirlOnTinder https://ift.tt/2KWrjYQ
