A sad fact about our society is we believe unsecured (i.e. credit card) debt is a way of life. With the average US household’s credit card debt being over $15,000, this speaks to how little we actually think about the purchases we make.
An neat site which helps you realize the “real” cost of making purchases when you are carrying a credit card balance is The Real Damage:
The real damage calculates the true cost of a purchase using your own unique financial situation. Unlike most debt calculators, we don’t show how much something will cost if you carry the balance on your credit card. We show you how much you’d save if you never purchased the item in the first place, and instead used the money to pay down your debt. Reverse the logic, and what we end up with is the amount that purchase truly costs you.
Yes, these are scare tactics but the resulting numbers are only scary because they are true.
Another interesting take on the “real” cost of purchases which this site does not take into account is the fact you are spending after tax money. For example, if you are in the 25% tax bracket, for every $75 you spend you had to earn $100. Looking at it this way means you have to earn 133% (100/75) of what you actually spend in order to purchase something.
While you can drive yourself crazy looking at things this way, sometimes it is good to step back and get a big picture perspective on things like this. You never know, the numbers may make you change your habits.
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Wow! That’s crazy the U.S. household’s average credit card debt is over $15,000! I don’t have a credit card, but if I did, there is no way I’d get it anywhere near a fourth of that number.