Credit cards can be a convenience or they can be your financial undoing. It is true that credit cards are convenient, reduce your need to carry cash and as well allow you to purchase bargains on the spot, and save money, that you might not have been able to do otherwise.
As your father or grandmother may have chided you "I am getting wealthy on your savings". True credit and credit cards can be a boon. Why is it that so many people have trouble with credit cards? Credit cards are a double, or triple edged sword. Why should be careful with credit cards? Credit cards are useful in our society. And yet these financial instruments deserve the same dread and respect that a recovering alcoholic should have about alcohol.
Credit cards can breed mountains of debt for the unwary. It is not only that we live in a society and time of "immediate pleasure". The refrain may be "Why wait for spring? Why deny yourself. Get it now". Indeed your grandfather may have told you repeatedly not to buy anything until you have saved the money. Best to wait. Never go into debt.
Never buy anything until you can afford it.
However it is not only our current curse of immediate and flagrant consumption of goods that leads more than a few people into credit card driven financial peril. Go into any major city. Ask for the "center of town" or look for the tallest buildings. Invariably these buildings will be "bank towers" and the offices of major banking institutions. You may well ask yourself that what did these organizations do or produce that they have accumulated and deserve such wealth. It is often said that the casinos in the gambling town of Las Vegas were not built on the winnings of gamblers. So is it with credit cards.
Credit cards are pretty much an essential item today. Go on a trip - you vacation. You may well find that you cannot rent a car without a credit card as collateral. Most hotels as well will almost insist on a credit card imprint on check in.
However the rules are stacked against you in credit cards and their management in your finances. A little exercise. You have $ 900 in your saving account. You move into a new apartment or condo. On sale you find a $ 2000 living room set for $ 100. You figure - I will put the purchase on the card, pay the $ 900 and carry the balance for a month. A small cost of interest for a large saving. However when your credit card bill arrives you notice a very large interest charge. The contract you sign with many credit cards stipulates that if the credit card statement is not payed in full "then interest is charged on the full balance from the date of purchase". Translation you will pay interest on the full amount of the purchase, and even on other items you bought. Not only will you be charged interest for that month but interest from the actual day you purchased the item. You will not even receive the first interest free period. It may not be fair, you may not like. However these are the rules that you personally signed for when you signed the credit card /s contract /s.
Now it makes sense. Why once people get into trouble with credit cards they never seem to be able to pay off their debts. The debts just seem to grow and skyrocket.
Credit cards and other such financial instruments are both essential and a godsend in today's world. If you find that you require them and yet want to limit your exposure and vulnerability an option is a prepaid credit card. In essence you are placing a cash savings reserve against future spends. You can only spend what you have in your savings deposit portion of this type of credit card. You can both save for purchases and be limited against overspending both as debt and a source of interest charges. You are limited to charging to the card only to the deposits you have on record with that account.
You cannot overspend the card. Good safety breaks are put on your credit card purchases.
Your Visa, American Express or MasterCard may be wonderful. However they can also cause you a fair amount of trouble and financial troubles along the road of life.
Treat these little pieces of plastic have great power to do you good or cause you great trouble, Treat them with the utmost of respect. .
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