Buying On Credit Has A High Price

As more and more Americans struggle to figure out where all their money goes, they might find the answer in their wallet or purse.

Credit cards are more popular than ever. The typical consumer carries nine cards, each with outstanding balances averaging $1,722, according to Visa USA, the largest issuer of those cards.

Ostensibly, credit cards allow consumers to make purchases that might otherwise not be possible.

True in the short run. But over the long haul credit purchases are a financial drain. At a 15 percent annual rate, less than the national average, that $1,722 average monthly balance costs $258 a year in interest. That’s enough money to pay cash for a new TV.

“Not long ago, people were still asking themselves, ‘Should I put this on my credit card or pay cash?”’ says Steven Birer, an information service analyst at Hambrecht & Quist Inc. “Now, it’s almost a reflex reaction for people to put the charge on their credit card, regardless of the type of purchase.”

Even credit issuers didn’t expect plastic to become this pervasive. Analysts have predicted for years that credit-card use would eventually plateau. But as the cards spread into grocery stores, convenience stores and even doctor’s offices, that line of thought is fading.

All of which means an increasing percentage of U.S. wealth goes toward financing our credit habit, leaving less money to be spent on real goods and services.

Index funds gain popularity

In the first half, the Standard & Poor’s 500-stock index outperformed four out of five managed mutual funds. As a result, investors are flocking to funds that mimic the market averages.

This isn’t necessarily bad. Such funds often have low fees and low tax bites. They also have less risk than many funds.

Still, well-chosen managed funds do beat the S&P, as new research by Morningstar Inc. shows. From Jan. 1, 1990, to June 30, 1995, the S&P returned 82 percent. But the average U.S.-stock Fidelity fund returned 114 percent; Putnam, 104 percent; Vanguard, 84 percent; and Franklin, 88 percent. Moral: Index funds do remarkably well, but don’t fall in love with them.

Home buying seminar set

Washington Mutual and Prudential Crane Realty will offer a free seminar on buying a home Saturday at the East Central Community Center, 501 S. Stone.

The program, which is from 9 a.m. to 1:30 p.m., will address topics such as saving for a down payment, determining what you can afford and qualifying for a mortgage.

For more information, call 800-572-0782.

, DataTimes