Keeping your finances on track, Part 1

Here's a mistake to avoid and an tip to help you stay on track:

Mistake 1: running a monthly balance on your credit cards. Credit card companies charge between 15% and 28% interest on monthly balances. By contrast, mortgage loan rates are around 4% and car loans are around 2% to 6%. Banks pay depositors just over 1%. Interest rates at 15% plus will cost you hundreds or thousands of dollars. 14% or higher is loan shark territory.

Credit card debt is a major component of most bankruptcies. If you can’t pay off your balance each month, you are spending more than you can afford and this problem will not magically disappear. It will lead you back into bankruptcy.

As a practical matter, once your running balance reaches $8,000 to $10,000 you will most likely never pay it off.

Instead of using a credit card, use a debit card that withdraws funds from your checking account immediately. Debit cards have a way of minimizing impulse purchases.