It has become commonplace to use credit cards when you don’t have cash – everyone does it. Just pull out your card and buy whatever you want – real easy! In reality it’s not quite so simple.
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. This may sound good if you don’t have enough money in the bank, but this is where your life in debt will begin.
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. Too often, people are charmed by the idea of a minimum payment. They think that they can now afford to buy several other items and only make minimum payments on those as well.
This leads to people getting more credit or store cards, making more purchases than they need to, and ending up with several minimum payments that are no longer so affordable, not to mention the interest that is being added on each month. The longer the bill goes unpaid, the more you will pay in interest until you owe much more money than the products were ever worth. Imagine buying a product, using it until it’s worn and throwing it out. But because you’ve only made minimum payments, you are still paying for a product that you no longer own.
Often you just feel like splashing out a little, and that’s okay. If that leads to maxing out your credit cards, rather go for a jog round the block! If the jog doesn’t curb the urge to spend some money or treat yourself, look for sales and discounts, and buy something you’ll use!
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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