The hidden way to stay poor

 The history of the modern debt is deeply routed with credit and credit cards. The idea that you don’t need to pay for something right now is fascinating, to say the least. The concept is a big leap from the traditional exchange practice, where someone exchange goods and services for money and vice versa. But apparently not so uncommon.

In the ancient Rome times, debt was not uncommon either and if someone dies or couldn’t afford to pay back, his creditors might go after family members and ask them to pay back or the person who owns money might sell themselves as a slave.

In the modern times, slavery is illegal, but we still have the concept of modern slaves, where if someone can’t pay their debt, they either need to go “under the grid” and live off cash, or if they have a job, most of their income will go to repay the debt.

But there is also another way to keep people in debt. The invention of credit cards provides something fascinating, and that is you are now allowed to overspend money you don’t have and you are not aware of how easy and fast you such purchase can escalate. We are not talking about going into debt for necessities. Now you can go in deep troubles for purchasing expensive electronics and other things and only after a certain time you will realize that. With some credit card interests going to 20%(ARP, annual percentage rate) and above, this is an astonishing price you might need to pay for a spontaneous purchase.

Let’s say you bought the latest high end TV for 2000 dollars. You don’t have that kind of spare cash, but let’s imagine it is Christmas and you decide to treat yourself with this gift. But since you don’t have that kind of money, you procrastinate to repay it. After 1 year you will need to pay with the interest 400 USD. This means that your total repayment now is 2400 and if you fail to pay it further, this amount will increase exponentially.

And because you don’t see this, you might end up in a repeated cycle of only be able to repay the interest and never the full debt and this is how poor people stay poor, by buying things they don’t necessary need on a credit and then fail to repay it.

This is also the reason people who want to start a business on credit usually fail, because it is easy to do so and get the money from a credit card, but it is hard to make a business successful and use the earnings to repay debt.

The moral of this story is that next time you are tempted to borrow money from your credit card, it is way better to think twice before you make a spontaneous purchase.