The Pitfalls of Credit Card Usage

We've all heard of that dangerous piece of plastic that some people carry in their pocket. This piece of plastic can be more addictive than heroin and cocaine, and sometimes it can have the same long term consequences. This piece of plastic is the credit card. Thousands of American's and people world wide area in debt created by credit cards. Credit cards are marketed so aggressively, that many consumers find it difficult not to own a credit card.

Credit cards are very simple devices that allow you to make purchases with money you don't have. If you pay them back in the first month you have no interest, and this process can be very important in credit building. Credit card companies do, however, make it just as easy not to pay off the debt. If the consumer doesn't want to or have the money to pay off the debt in the first month, then they simply pay around 20% more next month. At first this doesn't seem like a lot of money, for the benefit provided, but then you must realize that credit cards radically increase customer spending power.

When people go shopping with a credit card they effectively have no limit on what they can spend. Credit card companies are more than happy to increase credit limits in order to drive the consumer into a deeper debt, which, in turn will create a greater profit for the credit card companies. This slim plastic card or even just a series of 16 numbers in some cases can wreak havoc on a carefully planned budget.

After people have fallen into the initial trap of the credit card, then the credit card debt continues to compile. Eventually you are paying debt on the debt, in a process that economists call compound interest. Compound interest is one of the most powerful money making tools, but can also become one of the most deadly financial depleting weapons when turned against you. And in the case of the credit card this weapon is turned against you with both barrels loaded.

Credit card companies and banks target young people with offers that will allow them free stuff in exchange for creating a credit card account. Some stores even offer 30% discounts on your purchase just for the simple act of creating a card that allows you to purchase things with debt. These incentives seem like a great offer (their free, after all), but most people don't realize that credit cards and aggressive marketing will eventually overwhelm their financial and personal life.

The use of a credit card in a responsible manor is a required step in the process of building a credit history that will eventually allow people to buy a house. When using a credit card people need to be aware of the financial repercussions of their actions. Having a well paying job does not make you immune to the effects of credit card debt, and even the richest of the rich need to learn to charge responsibly.

Source: Associated Content