That might not seem like a significant amount, but consider how many purchases you put on your credit card every month and your interest payments can add up quickly. A 12% interest rate on your card, for example, means you're paying an extra $60 each year you carry the balance. If you purchase that system with your credit card and cannot pay off the balance immediately, you will be charged a fee on top of the $500 based on your card's interest rate. Let's say you find a tremendous deal on a high-end home entertainment system for $500. This means an institution is charging you a fee to borrow money which makes your purchases cost more than you might think. If you take out a loan or use a credit card, you are paying interest on your purchases. Do your homework to find the best solution for you, and learn how interest works to help you make smart financial decisions. When you put money into a deposit account such as a checking, savings or investment, you want a high interest rate. When you take out a loan, you want a low interest rate. What’s interesting about interest? Sometimes you want high interest rates and other times you want low rates.
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