Credit and is pitfalls

Credit has been defined as the procedure of providing a loan. In this process, wealth is transferred from one party to another. I came accross this definition when looking for one for "credit" The first part is precisely right. The second part is also right but not in the sense it was written. The wealth is transferred to the lender not the borrower. Debt and all its implications are transfered to the lender.
Our Western society thrives on Debt. If you do not have a "Credit record" you are the scum of the earth. I wish I could have half an hour with the youth of today and none of them will even think of credit again.

Why ?
Have a look at this :

1. Income R 20 000 per month
2. Car payment R 4000 ( R 180 000 car bought over 60 months)
(Average R1000 per month is interest)
3. Homeloan R 5000 per month (R520 000 homeloan over 20 years)
( R4332 first month interest)
4. Clothing account :
( R 500 per month )
( Clothing accounts are designed to charge no interest - however their products are at least 2x more expensive than when you have the cash !
5. Credit card R15 000 limit ( normally fully utilized)
Whatever the repayments are the interest per month on such a card is at least R300 per month (24% interest rate)

Because of his 'CREDIT WORTHINESS" This guy is paying over R 5882 per month interest to the bank -
But the scary things are : Over the period of his homeloan he will have paid the bank R680 000 interest - more than the price of his home
He would have paid the bank R 60 000 interest for his car over a period of 60 months.
He will be paying the bank R 3600 interest per year for the "Privilege" of using a credit limit of R 15 000 on his credit card !
He will be paying at least double for his clothes because of a 6 month credit line for the rest of his life !

99% of young working people fall for the credit trap in one way or another and keep the banking system afloat. To such an extend that the taxpayers have to sometimes step in without their knowledge and "save" a bank like Absa to the tune of R 1.4 billion ( see the lifeboat story in 1999) And now ladies and Gentlemen comes the big question: What does the bank do with your money? Sponsor the Rugby ?