Many of us receive coupons in the mail to our favorite store which gives us a 15% or 20% discount on purchases in a given time period. While it may be very tempting to run right out to the store to get a “deal” on the latest style, gadget, etc., there are a few questions that you should ask yourself.
- How much do I want this item?
- Do I have cash to pay for the item(s) and
- If I put this on my credit card, how much will I pay in interest to get this “deal”.
For example, a new laptop retails at XYZ store for $1250. You purchase this laptop at XYZ store using your 20% coupon and charge the purchase on your credit card. The discounted price is $1000 and you are feeling pretty wonderful about the deal on your laptop. If you just make the minimum payment on your credit card with an interest rate of 18%, you will end up paying $923.12 in interest over 113 months (9.4 years). In this example, the total to purchase this laptop was actually $1923.12 which is definitely NOT a “deal”!
Knowledge is power and it is so important that you make informed decisions when making a purchase, especially when purchasing with a credit card. Check out this online credit card interest calculator!
By Jennifer Moran