Credit Cards Are Not Free Money

Consumers Reports recently issued the results of their third annual credit card survey. One shocking statistic from that report shows that about 12 million consumers are still in debt from holiday shopping from the previous year. An increase in available credit the past decade has made it very easy for consumers to have multiple cards and has lured many into spending beyond their means. As a result of the crisis in the credit industry, banks are now more risk averse and are tightening the lending reins. Many consumers are turning to the use of credit cards, in the absence of once available loans and lines of credit. When credit cards are used in this manner, it is tempting to let the balances ride and increase debt.
There are many advantages to using a credit card, especially if you are making an expensive purchase. For one, you do not have to carry a wad of cash in your wallet. Credit cards come with some safety nets too. If someone fraudulently makes a purchase on your card, you usually are not on the hook for more than $50 of that purchase. You can also settle disagreements over inferior products or services charged to your credit card. And the click and mortar internet retail sector would not be able to sustain itself without payments made via credit cards. Thanks to your credit cards, you can buy diapers online and have them on your doorstep within a day. It eliminates the need for cash on delivery or money orders. An added bonus is that everything you buy with your credit cards can be easily monitored, itemized and put into budget tracking software. If you pay with cash or check, you need to save receipts and canceled checks to keep track of your budget.
The ease of use and protection offered by credit cards make them a preferred payment method for many consumers. Credit cards can also seduce consumers into easily spending more than they should. Many people only make minimum payments and continue to spend. In a perfect world, all purchases made on a credit card would be paid in full each month. Doing so would mean that nothing would be paid in interest. But by making only the minimum payment, most of that bill goes toward interest and not the balance. By regularly paying only the minimum payments each month and continuing to make purchases on those credit cards, a consumer can easily get stuck in a cycle of debt.
Credit cards are a very practical and convenient resource, but should not be used to pay for unnecessary things that push consumers beyond their means. Balances should be paid in a timely manner. If you responsibly purchase with and pay off your balances on your credit cards, you will also be able to handle emergency expenses more readily than if you carried balances on your cards. Only you are accountable for the balances you carry on your credit cards.
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by: barrywaters
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