Common Drawbacks of Using a Credit Card

by : Annabelle Rox

One of the most successful items in the financial industry is the credit card. In the past few decades, they have grown from one general purpose card invented in the late 1950s to a huge array of cards available. It is true that few adults live without at least one credit card and some people have several of them.

These plastic cards can be very convenient for people who want to shop online or by telephone or mail order. They are also great for shopping offline as there is no need to carry cash. There have been some security scares with credit cards but, in many ways, they are more secure than cash.

Unfortunately, there is a downside to the credit card despite what the glossy advertisements may say. They make it very easy to accrue large debts and often, it is difficult to see much for the money spent. The interest rates are amongst the highest in the credit finance industry so the debt just keeps on building up unless you use the card responsibly. Irresponsible use may lead to huge problems including bankruptcy.

Having said that, there are some ways that you can use a credit card without inviting trouble.

Beware the impulse spending. It's easy to get carried away with spending when you're not handing over that hard earned cash. However, when your statement arrives, you may find you spent more than you really should have. Try to resist the temptation to put things on your card because you may regret the decision when it comes time to pay.

Don't use your credit card for everyday costs or to pay your bills. This is a quick way to run up your credit card debt and is merely a Band-Aid solution to a poorly developed budget. There are other ways to borrow and many have cheaper interest rates.

You can even withdraw cash on your credit card these days but be very careful. The interest rates are usually even higher than on purchases so it can add up very quickly. Also, there is no interest free period on cash withdrawals so it is still going to cost you a lot more.

One of the most important steps you can take to minimize your debt is to pay more than the minimum each month. If you don't, you will continually be paying mostly interest charges and so forth and never making much of a dent in the actual debt. By paying only the minimum, it may take years to pay off the debt not to mention that you will have paid a huge sum of interest. Try to pay as much as possible each month to reduce your debt.

Finally, it is wise to organise an automatic payment from your bank to repay your credit card so that you don't overlook any payments. Credit card issuers will happily accept more of your money by hitting you with expensive late payment fees. Don't give them the pleasure. Keep your money and use your credit card wisely. This way, you should be able to stay out of trouble.

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