Biblical Guide to Debt
Debt is DumbYou may have heard that you need to debt to make money. Many government across the great planet of ours believe the same thing. The problem is that once there is debt, we basically need two dollars for every dollar we must pay back. It would be one dollar to pay off the debt, and another dollar to get into a positive standing. Many people want to use a credit card saying something like, “oh I will pay it off in full at the end of month.” Then the end of the month never comes. They just keep adding more and more to the point that the debt becomes almost unmanageable.
What the kicker is, most people could avoid this debt if they just did not allow themselves to fall into it. Speaking from experience a credit card can help in an emergency, but if I would have had a savings fund I would not have needed to use a credit card.
Credit card companies are not kind-hearted companies that just lend money to people for no reason and do not expect something in return. Companies expect to be paid back in interest. Some interest rates are low, while others are much higher. This interest rate is how the credit card companies make their money. It would be much better if you saved this extra money, and instead of giving it to the credit card companies, you give it to yourself to start off your savings.
In 2012, the average amount of credit card debt was a staggering $15,950. It is possible that people reached this amount because they had no choice. Other people may have purchased items that they did not need. Gluttony is a problem that many in America are facing. Their want is bigger than their bank accounts.
The Christian Bible is very clear on what is thought of debt. Proverbs 22:7 tells us, “Just as the rich rule the poor, so the borrower is servant to the lender” (New Living Translation). This means that a person needs to pay off their debt. When the debt is paid, it takes away from other things that a person could do with that money. It enslaves them to the debt, and it is very difficult for them to ever escape. Some may just decide to not pay off their debt. It is understandable that some may need help to get out and declare bankruptcy. Others just spend with no intention to pay it off at all. The Bible also has something to say about that also. Psalm 37:21says, “The wicked borrow and never repay, but the godly are generous givers” (NLT). I am not saying that a person that files for bankruptcy is wicked, but if you borrow money with no intension of paying it back, you are only hurting yourself. I guess what I am trying to say is that; debt is dumb!
Pay yourself instead of interest to the credit card companyJesus told a parable of ten servants that were given money by a harsh boss. This parable was not about saving money, but the idea behind it can help you understand hot important saving money is. In this parable found in Luke 19:11-27, each of the ten servants were given ten coins worth a lot of money. The boss wanted them to make him some money while he was gone. When he returned, he spoke to three of the servants. The first servant made ten more coins, the second made five more coins, while the last hid the money in the ground.
You must be asking yourself, what does that have to do with saving money? Well, the third servant was yelled at, and what he had was taken and given to the servant that made the ten coins. Their boss told him that he could have at least put it in the bank and it could have earned some interest. There is much more to this parable that this, but it is a recommended read.
Many purchases are made in spur of the moment. The purchases are not necessities, and it would be better off to just saving you money and waiting to make that big purchase. When you think about it, the bank is making a lot of money from people that have a credit card balance. In 2014, the average credit card interest rate was 21%. Then you look at the interest rate they pay you when you have money in savings, you realize they are basically robing you. Many banks have a very low interest rate of about 0.05% per year. There is no comparison.
Discover credit card can range from almost nothing to the highest allowable interest rate. Discover is not just a credit card company, but they are also a bank. They have standard checking accounts, savings accounts, and CD’s. Discover still wants at least $2,500 for their CD’s. Hopefully, if you have $2,500 for a CD you do not have a lot of credit card debt. Their rates are higher than many other banks. Their interest rate on their savings accounts is one of the best I have found in the country.
They have a return of 0.90% for their savings accounts! Still, that is much less than they receive from their credit card holders.
What to doThere are many things that you can do. Instead of making that big purchase with a credit card, and paying off the credit card later, you can save money up for that big purchase. You can even put the money into a savings account at Discover and get paid interest on it. It is compounded interest, which is an amazing thing. Albert Einstein once said,
“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”
This sounds a lot like a battle between a savings account and a credit card. There are many ways to save, but using a credit card is not one. Even for those that say they are only using their credit card for the points, must remember that no one ever got rich off their credit card points!