With more people than ever before using a credit card to make purchases online, there is a very handy online game which simulates having a card.
This credit card game is a great fun tool to teach you how not to spend money. Even so the game was conceived overseas the principle of looking after a credit card stay the same the world over. If you want to have your own go and play, click here now.
The first thing we do with our credit card simulator is to choose which type of card we want to use. We have chosen the Platinum card which has a $2000 credit limit, and an interest rate of 19.9% after our introductory period of 6 months interest free.
Then the game takes us to an online store filled with some very exciting and enticing items available for purchase.
Like in real life, right in front of our eyes we have $2000 available to spend as we wish, and plenty of items that many of us would like to purchase. We have LED televisions, computer consoles, Cellphones, Cameras and even sports season tickets.
Each item has a set price and looking through the items available, I would have easily been able to “max out” the card a few times over!
So I go ahead and buy a 26 inch flat screen TV, a leather jacket and a season ticket to a sporting club. These 3 items alone help me to rack up a hefty $1997 bill on my new credit card.
This is where reality bites. I now have to pay all this off! So looking at the terms of the card, if I can pay everything off within 6 months I only pay $1997, which is exactly what I spent. What card companies do most of the time is let you pay a minimum monthly payment, so you don’t have to find a big sum of money each month. What actually happens though is, if you only ever make the minimum payments each month, it will take you an age to pay off the debt, ensuring you end up paying massive amounts of interest.
Here we see my minimum monthly payment is only $60. Let’s see what I end up paying, if I stick to the minimum payments.
In the case of the leather jacket, I originally paid $199 for it. If I only make the minimum payment on my credit card each month, the jacket will end up costing me $254.77!!!!
What about the TV?
Well the TV that originally only cost me $999 now costs me $279 more and ends up costing $1278.99.
Finally the sports season tickets have rocketed from $799 to over $1000!
In total, as you can see from the screen above, even though originally I only spent $1997 on my shopping spree, by paying the smallest amount the card company would let me each month, I have cost myself an extra $599.70 overall!
Not a smart investment I am sure you’ll agree.
The trouble is many of us are seduced by the illusion of being able to spend on credit, and we make ourselves believe we will be able to pay the debt back before racking up any interest.
The key is to make sure you will have the money to pay back the total debt as soon as possible. Paying any interest at all is an unnecessary expense, but by ensuring you will have money put by to pay the bill in full within a couple of months of the interest period beginning, will cost you less in the long run.
If you do fail to pay off the bill before starting to accrue interest then increasing what you pay each month will reduce the total you pay overall.
Here, by increasing our minimum monthly payment to $100 instead of $60, we would overall save over $300 if we paid that every month.
Like all things credit card related, if used sensibly they can be very useful tools in our financial armoury. However reckless use will find you in a very sharp tailspin to financial hardship!