Wink Capital Shares Why You Shouldn’t Put the Latest Apple Products on Your Credit Cards
Like clockwork, on September 10th, iPhone early adopters can look forward to the newest iPhone to be on sale. If it is still important to you to have the latest and the greatest, you are looking at an outlay of over $1,000. For many, the new purchase goes on their credit card that they will hopefully have paid off by next year.
At Wink Capital, a firm that specializes in solutions for consumers struggling under heavy debt loads, we question if this is a really good idea. The following is our response and a few money-saving suggestions.
Why Not?
Rightfully so, Apple has a reputation for having top-of-the-line cell phones. Also, the iPhone you buy new today will likely be supported for several years with the newest iOS. If you buy the new phone and plan to keep it for several years, that is likely not quite as bad financially as buying a new iPhone every year.
Your Credit Card Interest Rate
A shocking number of consumers do not even know their credit card’s interest rate. CNBC reported that the average credit card interest rate in September of 2019 is almost 18 percent. If you are carrying a balance on your credit card, as is true of 55 percent of Americans, as reported by CNBC, then you will have to pay that whopping interest rate until the phone is paid off.
Examples
For example, if you intend to pay off an iPhone in one year, you will need to spend $91 a month to pay off the phone and its $100 interest incurred at 18 percent. If you intend to keep and pay off your $1,000 iPhone over three years, you will end up paying $36 a month and will have paid a total of $300 interest.
As you can see, the problem with using high-interest rate credit cards is that you will need to either pay the balance off quickly, or you will end up paying quite a bit more for the already pricey product in interest fees.
The Credit Card Debt Issues Snowball
Of course, this is just one non-essential, impulse item. Americans are carrying, on average $9,333 in credit card debt.
For someone who is awash in money, this is not a problem. For someone who does not have an emergency reserve fund, as is the case for 28 percent of Americans, this can spell trouble if the economy goes into a recession, and/or they lose their job.
If you are unable to make the payments on your credit cards, your credit score will suffer, and you will be forced into ever-higher interest rates for credit. This can make it hard to buy a home or a car, which are essentials, unlike the shiny, new iPhone.
Solutions
iPhone
If you just have to have an iPhone as opposed to an Android, USA Today suggests that you buy a used iPhone. Yes, you will not have the most storage, better camera technology, and the most power. But, you can add more storage with a flash drive that will attach to the phone’s Lightning port for around $32 for 64 GB. Cracked screens and old batteries can be replaced for far less than the cost of a new phone.
Also, USA Today reminds Apple consumers that the newest OS is supported all of the ways back to the iPhone 6s. The newest iOS 13 about to come out, with better photo and video editing and software that will eliminate robocalls annoyances, will be available on your older phone.
Credit Card Debt
If you are awash in credit card debt, you are likely paying exorbitant interest rates that appear to be designed to prohibit you from fully paying off the balance. If you are in such a situation and can pay off the balance in 12 to 18 months, consider a zero-interest, balance transfer credit card that will allow you to just attack the balance for an introductory period.
If you have more debt, consider a debt consolidation loan. A debt consolidation loan is a personal loan that will pay off your credit card debts and allow you to make one payment each month at a lower interest rate. This will allow you to make a lower payment each month and have a target date for full debt pay off.
Call us at Wink Capital with any questions you have about debt. We have practical solutions
