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If you are a resident of the Jacksonville, Florida area and are looking for a way to free yourself from overwhelming financial difficulties, filing for personal bankruptcy in Jacksonville may be the right choice for you: consult a bankruptcy lawyer and find out if that is the case. The article below has been provided by our Jacksonville bankruptcy attorney. |
Bankruptcy in Jacksonville: why it's cheaper to pay cash than to use credit?
A reader from Jacksonville, Florida sent in an interesting e-mail. This person had previously filed for personal bankruptcy in Jacksonville. During the bankruptcy period, by analyzing their spending patterns, he/she came to a remarkable conclusion: one of the causes of the bankruptcy was that they used credit instead of cash, and that’s what caused the problems. Credit cards should be a substitute for cash, not a substitute for borrowing.
Read that line again, because it’s important: credit cards should be a substitute for cash, not a substitute for borrowing.
Here’s why it’s cheaper in the short and the long run to pay cash instead of using credit.
Let’s say you want to go into a store to buy a big screen TV. The price tag for the television you want is $2,000. If you use your credit card to buy the television, and if you carry the full balance for a year and then pay it off, you are paying interest for one year. If the interest rate on the credit card is 18%, you end up paying $360 in interest, so the $2,000 TV actually cost you $2,360!
Talk about bad spending habits leading to personal bankruptcy!
However, let’s say you walk into the store with cash, instead of a credit card. You offer to buy the television for cash, instead of on your credit card.
Many stores will give you a discount if you pay cash. Why? Because the credit card companies charge the retailer a fee for every credit card transaction they process. The fee can be as high as 5%. That means that on that $2,000 sale, the retailer had to pay $100 to the credit card company. In addition, there may be transaction fees and other fees they have to pay.
If you offer to pay $1,950 cash, the retailer knows he is saving $100 in credit card processing fees, so it’s a good deal for him, and obviously it’s a good deal for you!
See the difference: paying by credit card and carrying a balance means the television cost you $2,360, but paying cash it only cost $1,950.
Many people worry that if they file for bankruptcy in Jacksonville they won’t have credit cards. As the above example shows, that’s not really something you should worry about, since it’s actually cheaper to not use credit cards. As a matter of fact, one of the ways to avoid filing for bankruptcy in Jacksonville is avoiding credit cards.
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