It seems that everyone has a credit card these days. It’s so easy to pull out your card to buy whatever you want, isn’t it? The reality is a little different.
When you use a credit card to buy something, for example a new television or a dress, the bank or store is actually lending you the money to make the purchase. As with all loans, you will be expected to pay it back. In a few weeks when you receive your statement, you should try to pay it back in full right away.
Your statement may say that there is a minimum payment you are required to pay, often a small percentage of the total amount. Be very wary of those small minimum payments though. It may be more affordable to only pay that small amount, but this is often where people’s problems with credit card debt begins.
If you only pay the minimum required, you will incur interest charges. This not only increases the original amount you paid for your purchase, it increases your minimum required payment. This is where people start getting into trouble. It looks easy to repay, the minimum payments are affordable, and people are easily tempted into making more credit card purchases.
More cards mean more bills, with rising minimum payments and interest being added on until they are no longer quite so affordable. One of the dangers of minimum payments is that you may be paying for something long after you have finished using it or it has worn out.
There are times when a treat can make you feel better, but if it leads to a spending spree you can’t afford, it is not worth it. Try a little fresh air or some exercise instead. If you still want to spend money, look for good bargains and discounts, and stop at one purchase.
Credit cards can be useful, but they must be used responsibly. Some people recommend keeping them for emergencies only, such as unforeseen car repairs, but generally you should only buy what you can afford to repay in the same month. When the bill comes in the mail, take it seriously. Sit down immediately, write a check, and pay off the bill. Do this every time you get a bill. If you see that your cash flow is going down, curb the spending. Remember that missing payments can affect your credit record and your ability to get credit when you really need it.
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