Have you ever stopped to think about how much things you purchased on your credit cards in the past are actually costing you? Month after month you continue to pay interest on something purchased years ago, possibly an impulse buy to begin with. You might even be paying interest on something that has already been disposed of or has completely deteriorated in value. How many dinners, outdated electronics and clothes, and vacations were financed by credit cards and are still being paid off? Event though the gratification in the purchase was lost months ago, the cost of the purchase continues to add up every month as you incur more interest on your credit card balance.

I purchased a rear-projection TV I purchased with a credit card many years ago. I was so proud of all the research I had done to shop around and get the absolute best price. Meanwhile, my $2,000 TV ended up costing me closer to $4,000 by the time it was paid off. Even worse, once my great buy was finally paid, that model was outdated and replaced by a slimmer, sleeker, bigger and cheaper design. Can you even buy a rear projection television anymore?

It was experiences like these that allowed me to realize that buying anything on credit without the intention of paying off the balance immediately was a very poor financial decision. It was painful to know I was continuing to pay for something that either I no longer appreciated or had diminished in value.

Imagine all of the things you pay for using credit that are continuing to cost you money. Wouldn’t it be nice to have no credit card debt and use the extra money for something more useful, such as an investment that actually makes you money? Think about if you eliminated credit card debt. How much more expendable cash would you have? How much monthly cash flow would that create for you? What would you do with that extra money?

It was when I started to ask myself those questions several years ago that I was driven to live a credit card debt-free life. I made a commitment to stop using credit cards for things I could not afford right there and then, and developed a plan to pay off all of my balances. I live by the philosophy that if I can’t afford it, I don’t really need it. If I really do need it, I better find a way to afford it. As a result I have become very creative in finding ways to increase my income and budget wisely.

I still use credit cards to take advantage of the things discussed in Don’t Cut Up Your Credit Cards, but have managed to not carry any balance forward. As a result, my credit card company regularly increases my credit limit based upon my outstanding payment history.

Millionaire Money Habit: Using credit to purchase unnecessary things you can’t afford to immediately pay off is just a poor financial decision, and diminishes your investment returns. The ability to consistently make the investment returns that make up for your debts would be an impressive track record. Avoid the interest payments all together and change the belief that the spending limit on your credit card is “additional income” rather than the noose that it is. -RT