# Compound Interest Math Problems And Answers latest 2023

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## Allison Tait Interview About Credit Cards

Allison Tait is the author of an excellent book called Credit Card Stressbusters. This book is an in-depth look at why people use and love their credit cards. Additionally, the book discusses how to lose your credit card and how to pay off debt. We are lucky to have a great interview with her this month.

OK Allison, maybe you could tell us a bit about your background and what you are doing now?

I am a journalist with over 20 years of experience. For the past eight years I have specialized in personal finance writing for ninemsn Money and MSN NZ and more recently Madison and news.com.au. I’m very good at asking questions!

Allison, you have written a book called Credit Card Stressbusters. You talk about all the reasons why people should cut their card. But if you had to limit yourself to the top three reasons why people shouldn’t get a credit card, what would they be?

In the book I suggest that people cut their cards because the implication is that if you read the book you have a problem with credit card debt. I think the three biggest problems with credit cards are:

1.They create distance between purchase and payment – and make it much easier to spend money and live beyond our means.

2. People seem to forget that the money they spend is not theirs – it belongs to the credit card provider and it has a high price (high interest rates).

3. Minimum payments on credit card debt are designed to satisfy the bank – they are not designed to pay off your debt. If you only pay the minimum payment, it can take years and years to clear the debt and cost you thousands of dollars. To use a credit card wisely, you need to pay it off in full each month.

How did you come up with this idea and why did you want to write this book?

I was approached to write the book as part of a series (there is also a great book called Mortgage Stressbusters). At the time of writing, Australians were carrying record amounts of credit cards and personal debt. I wanted to write a book that was easy to read, practical, and eventually entertaining. I really wanted readers to get to the end of the book (which is a big deal with finance sometimes).

In the book you ask a question from the readers point of view “How can I live without a credit card when the world is organized this way?” What do you mean the world is organized this way and how can one live without the convenience of a credit card?

The world is moving away from cash and towards cards. Some analysts go so far as to suggest that we could be completely cashless in 30 to 50 years. You need a credit card to make a reservation just about anywhere these days (especially online) and marketing drives us towards the idea that convenience is key (just see the latest “Tap and Go” commercials, where a man trying to pay cash is treated as a social outcast). It’s hard to manage without a credit card.

But there is a solution, and that’s a debit card. Same convenience and access, but you’re using your own money, so less likely to end up with personal debt issues.

In your book, you use real stories of real people struggling with credit card debt. Is there a story that comes to mind about someone in debt that you would like to share? (A special case)

One that stood out to me was the woman who fell under the curse of the “creeping limit”. She received “pre-approved limit increase” letters from her financial institution, arriving at times when she might need extra money (Christmas, summer vacation, etc.). His provider also allowed him to go over his limit, rather than have his card declined. Her credit card limit rose over time from \$1,000 to \$4,500, almost without her realizing it – while she was still trying to pay off a foreign credit card with a limit of \$7,500.

She was working hard to pay off her two debts – while taking comfort in the fact that her credit card debt wasn’t the worst in her circle of friends. A friend of his had a credit card debt of \$30,000.

It just shows you that you need to take a long hard look at your own financial situation before accepting that the bank has your best interests at heart when offering a raise. A lot of people think “Well, they wouldn’t offer it if they thought I couldn’t afford it”, but it requires more research than that.

What are the biggest excuses you hear from people in debt who don’t give up on their credit cards?

They say they keep them for ‘rewards’ – but those air miles are very expensive if you can’t afford them. They say they need a card for ’emergencies’ – but unfortunately emergencies seem to crop up time and time again.

What do you think of credit card marketing?

I think like all marketing, it’s designed to promote credit cards; sell a dream. It’s up to each of us to take control of our own finances and decide if the dream is worth it.

Have you always been good with money and budgeting, did it come naturally, or did you have to learn. And if you weren’t good at one point, what made you change?

I think we all have to learn to some degree. My parents were always very sensitive to money and taught us the importance of saving. As for credit cards, I got my first card at 23 when I went abroad for a few years. It had a low limit and I didn’t use it much. My worst credit card years were in my late twenties, when I was single, working in magazines, and having a great old time! But it didn’t take me long to realize that it wasn’t viable – and the extra work it took to earn extra money to pay off my debt was a good, hard lesson. I never got too crazy though. I have a healthy respect for money.

If someone is really in debt, what would be your first piece of advice?

Acquire help. There are many excellent free financial advisory services available and they will be able to help you really analyze the numbers and consider your options. To get your debt under control, you need a clear picture of that debt – ugly as it is. Oh, and cut the credit card! You cannot refund it if you are still using it.

If you could turn back time to your 21st birthday and give yourself money advice, what would it be?

I don’t think I would change too much. I’d probably be a lot richer now if I put the money I spent overseas for two years into a security deposit, but I’d be a lot poorer on the experience side of the equation. I think the key is to live within your means. If you don’t spend what you don’t have, it’s much easier to move on.

If you had to recommend a budgeting book to people, where would you direct them?

To be honest, I would probably direct them to the internet. There are fabulous websites designed to help people budget, as well as online tools and calculators to help. Start at http://www.understandingmoney.gov.au

Do you have any budgeting tips for our readers that aren’t related to credit cards?

The best tool for budgeting is honesty. You need to be honest with yourself about what you spend. You need to take out 12 months of bills and figure out what the monthly electricity, water and gas payments are. As for daily expenses, get a notebook and write down everything you spend for two weeks. It will give you the answer to this eternal question: “Where does my money go?”

When the GFC hit the world, did you notice people’s habits changing, and if so, what were and remained changed, or do you think they came back before the GFC?

News.com.au reported last week that Australians owed \$49.3 billion on their credit cards, an average of \$3,321 per credit card holder. That’s more than the \$3200 I had when I wrote my book in 2009. Experts suggest part of that is due to the rising cost of living – we’re putting more day-to-day expenses on our credit cards. It is important to remember that credit cards are one of the most expensive ways to borrow money.

You talk about compound interest in the book. But why is it so important?

For most of us, the compound interest formula was something we learned in high school math and quickly forgot. But it is important. With compound interest, the amount you owe on your credit card is calculated on both the principal amount owed (say \$1,000) and the interest (\$150, assuming an interest rate of 15%) . Unless you pay off your credit card in full each month, you will be charged interest on interest on interest. And it’s calculated monthly. This is called the compounding effect and means that the amount you owe keeps increasing. In two years, assuming the figures above, you will owe \$1347.35 on this card – which means your debt has increased by more than a third!

Is there anything more that you couldn’t include in the book that you wish you had?

No, I was quite happy. I think I’ve come a long way on the topic of paying off your credit cards!

Thank you very much Allison, you have been most helpful.

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