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Mother's Day gift from ole joyful: 28% - 42% return on some your money

4 months ago

Hope you're having a lovely Mother's Day, with mother now or in memories.
I'm an old guy: remember the days before household fridges, when small, rubber-tired, covered wagons drawn by one horse delivered bread, milk and ice to homes in our city, as in hundreds of others, in about the 1940s.
And before the days of "credit" cards, which began in mid 60s, begun by banks and other financial institutions which I assume chose a name for those little pieces of cardboard.
But ... wait a minute. In seven years of university I was taught to think and speak as accurately as you can.
The minute before you use one of those more recently plastic things, you have no debt: the minute after you use it ... you have debt.
It is a "DEBT card": maybe the originators, having a dog in the fight, didn't like the sound of that.
If you pay your balance owing in full every billing period, you have no interest or fees to pay.
If you carry balances owing from billing dates forward, cards issued by banks usually charge 21% annual rate, which is calculated monthly, so adds to more after a year.
Recent income tax calculations has caused us to recall that we are taxed on almost all income.
But as we deal with our money most of the time, we consider mainly what is available for use, seldom thinking of it as being after-tax money.
If you were to owe $100. for a year, and have to pay $21. interest, fees, etc. plus the added amounts added due to monthly calculations, how much would you have to earn before tax to pay that amount owed?
Of the things and services that you used the card to buy during the year, how many offer a reduction in tax charged? For most of us, usually very little.
So if you are in 25% income tax bracket, you'll need to earn $28. plus some, pay $7. plus of income tax, to pay the interest/fees for that year's use of that money, before paying anything for what you'd bought.
Other issuers, including many stores, charge 31% or so fees/interest on the balances unpaid each period, and calculate each billing period.
So if you are in 25% income tax bracket, better plan on earning 42% or so, pay $10.+ income tax, to have the $31.+ to pay the fees on the use of their money.
Often the card issuers offer cards to Univ. students or graduates, and other young adults.
It's so easy to use those "DEBT" cards to buy goods and services ... that many buy more than they can comfortably pay in full each billing period ... so they are stuck with paying the high fees.
So maybe make a deal with Dad - I want to pay my billing in full each period, to avoid those high rental fees on the money, so will you lend me enough to pay this off now, at 5%, so I can do that?
Most Dads'll say "Great idea!" ... and follow up occasionally to make sure the young adult is following through, using money wisely.
It costs a lot for the card issuers to operate the system for the folks who pay in full every billing period, especially if they offer cash-backs and other perks.
Guess who pays for all of that?
Wouldn't you rather be paying in full each billing period, and earn that 28+%, or the 42or so percent, on that part of your money?
At age 94, just home from 10 days of blood in urine, 7 days in hosp., needed 2 units blood. Feeling well, a bit short on energy, getting more than usual sleep. Son caring for me.
ole joyful ... earlier name was "joyful guy"

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