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hi auntie gayle here and today i want to talk about credit [Music] so subscribe follow or share and come on the go with auntie gail credit cards i describe them as a loan in your pocket i want to tell you about my nephew he's 24 years old just graduated just got his first job so he went into a bank to set up his banking arrangements the bank officer said to him hey do you have a credit card he said no i never had one she said okay filled out this application i'm gonna get you a credit card she got him a credit card five thousand dollars on this credit card so he has a five thousand dollar pocket loan so he worked the entire week on friday he's going out with the boys you know he's just got a job they're taking him out to celebrate they bought dinner buy drinks he said listen the next round of drinks is on me i've got a credit card everybody said whoa you got credit you're a big boy and he bought a round of drinks for his friend of course one round led to another and another so he ended up buying quite a few of those rounds of drinks with his credit card as time went on he's on the internet you see equipment that he likes he buys the equipment you know where i'm going with this pretty soon he has used up the entire five thousand dollars of credit okay now credit when you it's a loan so when you have a loan you know what happens you have to pay back the loan and not only do you have to pay back the loan you have to pay back the loan with interest now credit cards have something that we call apr apr means annual percentage rate and that is the interest rate that they usually charge on the balance now that interest rate is usually between 16 percent and 23 but it could go as high as 29 so it's an extremely expensive form of a loan so let's say he had that five thousand dollar loan at the end of the month the bank asked him to pay back some of the money on that loan they said the minimum payment is one hundred and thirty three dollars so he's paying back a hundred and thirty three dollars a month but if you pay back just the minimum balance on a credit card in his case a hundred and thirty three dollars a month it will take him 23 years to pay off that credit card loan that's right 23 years so he'll be 50 years old close to 50 years old and he'll still be paying for that round of drinks a credit card loan is designed to keep you always in debt it's designed to keep you paying and paying and paying forever it will seem almost impossible to dig yourself out of credit card debt now some people would say i need to have a credit card because i want to build up my credit yes you can get a credit card to help build your credit but one trick that you should always remember is if you have a credit card at the end of every month make sure and pay off the balance always pay off your balance at the end of the month because what happens then is that you are not charge interest as a matter of fact you end up getting a interest-free loan but only if you pay off the entire balance at the end of every month that way you can build up your credit build up your credit rating but still not get yourself into debt if you can't do this then don't get a credit card now if you find yourself in credit card debt what can you do well there are ways you can get your out i'm going to talk to you about three different ways three tips that you can use to get yourself out of credit card debt first one you might want to look at getting what is called a consolidated loan that means you go back to that same bank and you say listen i want to get a loan to pay off my credit card and i want a loan at a lower interest rate and i'm paying less per month at the end of the day so that i can pay off this credit card sooner than 23 years so you can do that that's one way now a lot of banks do not lend to pay off their credit card debt why because obviously it's better for them if they can charge you the higher rate on the credit card than giving you a lower rate loan to pay off that credit card they're making less money so you might have to go to a credit union or some other type of institution lending institution to pay off your credit card debt that's one strategy another way to get out of credit card debt is to pay twice the minimum balance for example in my nephew's case he had a five thousand dollar balance and his minimum payment was a hundred and thirty three dollars so if he paid 266 dollars instead of 133 guess how long it will take him to pay off his loan 23 months as opposed to 23 years it will take him 23 months instead of 23 years so he won't be 50 years old and still paying for that round of drinks and the final strategy is to attack your smallest credit balance first so for example if you have let's say three credit cards one balance is ten thousand dollars another is three thousand dollars another is one thousand dollars focus on the one that's one thousand dollars put all your extra savings into paying that off so you pay that off eliminate that then you go on to the next one and then you go into the next one until you've paid them all off you can also look at paying the one with the highest interest rate first so if you have a credit card that's the api is 16 you have another one it's 25 focus on paying off the one that's 25 first and then focus on the one that's less so those are the three ways that you can tackle your credit card debt now credit cards have a lot of charges and a lot of fees the apr fee is the one we talked about that's the annual percentage rate they also have a penalty apr so if you're late in paying of making a payment there's a penalty so they charge a higher rate on your annual percentage rate there's an annual fee a lot of credit cards have an annual fee this annual fee is charged annually as it says and it's usually between maybe about fifty dollars to two 200 what cause is the difference if you have a credit card with a lot of books let's say it has miles you get money back cash back you get points you're paying for all those features as a matter of fact if you don't use the points you don't use the the miles and so forth you end up paying for something that you don't even use so just get a plain vanilla credit card some credit cards also have a foreign transaction fee so if you use your credit card outside of the country you pay this fee now something strange happened to me i signed up for netflix and it turned out that netflix charge was being charged in amsterdam so i ended up paying a foreign transaction fee every month that my netflix was charged credit cards also have late fees they may charge you thirty dollars or so on as a late tree if you pay a credit card late and they also increase the api if they have an apr late fee so you could end up paying not only a late fee for being paying it late you could also end up paying extra interest on the delayed balance so be careful of those fees credit cards also have what they call a balanced transfer fee if you transfer a balance from one credit card to another you pay a fee they have a fee if you take a cash advance if you use your credit card in an atm to get cash you usually pay a three to five percent fee why is that well when you use your credit card in a store or when you use it online or you use it at any merchant the credit card company charges the merchant about three percent so if you're going to an atm you're not going in a store how do they get that three percent you have to pay for it so credit cards are very expensive they have a lot of hidden fees and you you can end up in debt very easily so be careful of credit cards whatever you do before you even start to save pay off that credit card debt next time we'll be talking about cars and car loans