Hazards of Having A Credit Card – Are You Trapped?
Hazards of Having a Credit Card
My grandparents taught me something when I was young; paying for everything with cash keeps you out of debt. Their philosophy was that it’s too easy to get in over your head and mismanage money if you are using a piece of plastic. They called this debt the hazards of having a credit card.
It is very easy to overuse and misuse a credit card. Here are the following ways:
- Making purchases you don’t have the money for at the time you buy something. Many people think that they will worry about it at the end of the month or they feel they will have the money by the time the bill is due.
- Overspend because you just do not realize how quickly it is all adding up. You may think it’s just lunch here, coffee there, and a small shopping trip. Each day that total is adding up. By the end of the month, there could be quite a bit of charges added up.
- Making an expensive purchase. Buying something for thousands of dollars that you would normally not purchase if you were using cash. You reason that you can make payments over several months.
One of the hazards of having a credit card is that it makes it easier to buy things you do not need or use a credit card for routine purchases like eating out, your morning coffee fix, and gas for your car.
[bctt tweet=”Having a credit card can be helpful or it can be a disaster waiting to happen. Where are you…” username=”HBSMoneyTips”]
If you cannot pay your balance off each month, you are adding more money onto your debt because of interest. Interest for many credit cards is very high. If you are already struggling to pay your monthly credit card bill, adding additional money onto that balance makes it more difficult.
Having a Credit Card Can Lead to Unnecessary Spending
Harming your credit score is another one of the hazards of having a credit card. Carrying high balances on cards and making late affects your credit score. Your credit score lets others know how financially responsible you are. This tells lenders how loan worthy you are. It’s a good idea to get your one time free credit score. If you want to buy a house or need to buy a new car, your credit score will greatly affect your approval, down payment, and interest rates. Good credit is also needed for new cell phone service and even the startup of utilities. Credit is so important that even many employers will do a credit check along with a background check. Sometimes the hazards of having a credit card are not worth the risk.
Another of the hazards of having a credit card is credit card theft. It has happened to me and it is the last thing you want to deal with either at home or on vacation. If you use a credit card at an ATM, your credit card number can be copied or the number could be copied during an electronic transfer. Since the credit card is never lost, many people are unaware when this theft happens. By the time they are made aware, the card has been maxed out and may have adversely affected your credit score.
The financial stress for mismanaged credit card use is one of the hazards of having a credit card more and more Americans are turning away from. Having said that, I still like having only one credit card for an emergency, and for making a purchase online. I make sure that the entire balance is paid in full every month. There are varied opinions on the benefits of a credit card, and if you are careful not to accumulate credit card debt that could hurt your credit score, that’s fine.
I’ve seen many young couples, having three credit cards and more, maxing them all out to furnish their new home that is much too large for them. With a high mortgage payment and even higher credit card payments, they’re struggling financially and emotionally, and then marriage problems develop from the stress. There are many benefits of having credit, but be careful not to get in over your head.