It sucks that you don’t know what you don’t know until you run into a problem.

Life isn’t fair, bottom line.

Luckily, that’s why we write these articles to help educate you about adult subjects so that you don’t get taken advantage of.

Credit cards typically have an interest rate greater than 14%, which is higher than Bernie Madoff made his clients. And if you don’t know Bernie Madoff, he was a scam artist.

So, if scam artists can’t make 14% for clients, then your credit card shouldn’t be making 14% or more for themselves.

Being 100% real, I racked up Credit Card debt last year and learning the hard truth about what those companies don’t want you to know. In the beginning, they sell you on Cash Back, Points, and Rewards.

As you rack up debt, here is what they don’t tell you.

1) Missed Payments Pay a Penalty

Yup! Every time you miss a payment, you’re going to pay a penalty. I know from experience my American Express penalty when I miss a payment is $39.00. Not too shabby, $39.00 isn’t going to change my life, but if you neglect these payments that’s an extra $468 you could’ve used towards your travel fund.

2) Interest is Charged to Your Earliest Purchases

So, you’ve missed a payment or 2? Big Whoop! Well, as you start to pay down your credit card debt, these companies will apply your payments to the most recent purchases. This means they are going to continuously charge you interest until you can pay down your debt.

Didn’t understand what that means? That means that the Credit Card you’ve been racking up those points on is going to charge you interest on the exotic vacation you “treated” yourself too 6 months ago. And that trip is going to cost you minimally 14% compounded annually ($140 for every $1000 you spend).

Bottom line, Credit Cards aren’t bad.

They help you build credit, allow you to earn points, and teach us to hold ourselves accountable. Just like you can exercise too much or oversleep, it’s extremely easy to overspend.

Life isn’t fair, so there will be a time that you’re going through financial difficulty, and that’s okay. Remember that you’re doing the best you can and at least you’re taking action to improve.

In the words of Zig Ziglar,

“You don’t have to be great to start. But you have to start to be great.”

Happy Slacking,

Joshua Krafchick, CRPC®, EA