Minimum payments are just enough to cover the finance charges. Most Americans should not use credit cards for the following reasons: it will create bad spending habits; you will incur more debt affecting credit score rating; and possibly make you a victim of identity theft. In my opinion, a credit card should be used for purchases that you are able to pay off in full upon receiving your statement, but most of us don’t. Most people lack self control and tend to misuse the credit card.
Credit cards should mainly be used for emergencies, but we tend to use them for everyday purchases such as: food, gas, clothing, etc. Some people are living in a borrowed lifestyle, because they purchase things they can’t afford. People will spend more on a purchasing using a credit card than they would with cash. “People that use credit cards tend to spend 12%-18% more on transactions than those who use cash (faithfitnessfinance. com). ” For example, if you are going to pay with a credit card in a fast food establishment, it is easier to get the large drink instead of the medium drink.
When the statement arrives, most people will make the minimum payment on his/her credit card. The minimum payment only covers the finance charges, which will increase the amount of time it will take to pay the debt off. “It will also increase the amount of interest you end up paying (about. com. )” Possessing these bad habits will lead to more debt. A credit card bill is an additional monthly expense. If you are already struggling with paying basic monthly bills, than creating a credit card bill will only add an additional financial burden.
Unlike a checkbook ledger, credit card balances are harder to keep track of, because you mostly rely on the monthly statement. If not properly monitored, this will cause your credit card to reach its maximum limit or over the limit. If you are over the limit or at maximum limit, you will incur over the limit fees or higher monthly payments. When faced with additional charges or higher monthly payments, individuals sometimes put themselves in a bind. They are forced to make a decision whether to pay the bill or not.
Most of us will opt not to pay, because we can’t afford it. Once you opt not to pay, you set the wheels in motion for your credit score to decline. If your card is at its maximum limit or close to the limit and you decide only to pay the minimum, you are still compromising your credit score. Credit rating is very important, because it is a deciding factor in majority of major purchases such as: car, house, utilities and etc. “A large part of your credit score considers the amount of debt you have (about. com).
If your credit score is low, most likely you wouldn’t be approved for whatever you are trying to purchase or your interest rate will be ridiculously high. Credit card use can also lead to identity theft. We see on television almost on a regular basis that they have arrested someone for identity theft. Everyday people are falling victim to identity theft. Anytime you book a trip, pay a bill or make a purchase online or in person, you are risking someone stealing your identity. We live in a world that is filled with criminals and con artists.
They are always larking to find their next victim. This is an easy way for them to obtain sensitive information, make money and purchases that will benefit them while making your life complicated. From a personal experience, someone stole my credit card information and personal information. This person rented a U-Haul truck and kept it for months and decided to make purchases at Home Depot. I was stuck with the task of contacting the credit card companies and the authorities. You are forced to prove that you are not the person that authorized payments and purchases.
You are subject to denial while trying to obtain credit from other companies. Sometimes it isn’t always a cut and dry situation to get through, but can be a very time consuming and expensive process. Credit cards aren’t bad when used properly, but could be if used improperly. We should make sure we know the difference between what we need and want. We sometimes justify a purchase by saying ‘I really need it”, but we should ask ourselves “what will happen if I don’t get it? ” Once you ask yourself that question, then at that point is when you determine whether or not it is orth using.
Improper use of a credit card will lead you quickly into debt. It is better to make a purchase with cash or debit card than with a credit card. If you are unable to afford something you really want, it is best to save and buy it at a later time. Most of us aren’t equipped to know how to use a credit card properly; therefore, it is in our best interest to keep it in our wallets. When thinking about getting that credit and using it, ask yourself, “Do I know the rules of the credit card game? ”