Can You Be Trusted With a Credit Card?

Mon, Nov 19, 2012

Financial Advice

Owning a credit card is a bigger responsibility then most people see it as, and that is proven true, given that the average American has a credit card debt of just under $15,000. That amount is staggering, but not surprising given the current state of the economy and the culture that people have been raised in. The main question that should be asked before a credit card is applied for is, “Can I trust myself with this credit card?”

The Major Credit Problem
Before you even think about applying for a card, you should know some stats about others in your situation. In the United States, adults currently hold just over 600 million credit cards, which averages out to about 3.5 per person. Also, take into consideration that millions with bad credit do not have any cards, which makes the total even higher for people with good credit. How is it that people with fair to excellent credit have accumulated $2.5 trillion in credit card debt? The simple answer is that credit cards are easy to get, offer attractive benefits and play to people’s fantasies of living above their means. All it takes for a person to get into trouble is one quick lapse in judgment, and having a credit card there to fund it immediately compounds the problem. But how exactly do they do this to these seemingly smart consumers? Credit card companies are experts at hyping up the benefits they offer, which in turn is why people use them. The companies are betting on the fact that consumers will rack up a huge bill in order to hit reward levels and then not be able to pay the entire bill at one time. Here is an example that happens to many business-people.

How Someone Gets into Debt
Often, when a person is traveling for work, they will put the expenses on their credit card so that in return, they will receive the rewards. Now, some employers will not pay the bill directly, but they will reimburse the employee for the expenses. So, the employee has charged all their expenses in a month (gas, dinner, supplies, maybe even airfare) and now has a large amount of debt. Say they are a little short on money that month and could use a few extra dollars. Instead of taking their expense check and paying off the credit card, they may just deposit it and make the minimum payment instead. Now starts the vicious cycle. The employee may have gotten 1% to 6% cash back or airline miles, but now they have a huge balance to pay and the interest charges will cost them more than the rewards will pay them in just one month. This is how people get themselves in trouble, and avoiding it is harder than you think.

Avoiding Huge Credit Card Debt
However, having a credit card or two is almost a necessity in today’s world, as you will need it to hold a hotel room or even as another form of ID. So how can a person have a few credit cards and not accumulate debt? Here are a few quick tips to avoid staying out of debt:

-Use only for emergency reasons

-Charge only the minimum amount needed or pay part cash, part credit

-Don’t carry the credit cards with you. If you want, carry the numbers and other info you would need in case of an emergency

-If you want to use the card for a frivolous purchase, give yourself a 24 hour cooling off period. Go home, think about it and often times, you will realize you don’t need that purchase

-Make a budget every month and stick to it so you don’t need to rely on credit cards to buy groceries or gas

These simple tips can help keep you out of debt as long as an emergency doesn’t arise. Even if one does come up, you will be ready to tackle that debt immediately before it grows into an uncontrollable mess. Just be smart and make a conscientious decision, not a purchase that will harm your finances for years to come.

Carol Smith is a financial writer who likes to give financial advice. If you have struggled with debt and need to file for bankruptcy, be sure to seek advice from a certified bankruptcy lawyer to help you out.

, , , , , , , , , , , , , , , , , , ,

Leave a Reply

CommentLuv badge