Pitfalls Of Credit Cards

Over the past 25 years credit card debt has increased over 1,000 percent. The average household credit card debt is $4,126.

Taoism states that everything has a opposite in the world and this statement could not be more true in the case of credit cards. For all the convenience, flexibility and advantages associated with credit cards, they come with the danger of making you bankrupt if you are not careful.

Long since credit card was first introduced in the 1950's it was noticed that consumers tend to spend more while using credit cards. Partly, human psychology is responsible. The very fact that you cannot see the money you are spending coupled with the assurance that you could pay it off later, entices many people go overboard with their budget.

Like loans, credit cards are not free money. The interest rates are generally higher than any other form of money you can borrow. Consider the following scenario. You go to a sale and chance upon a beautiful dress. It has a marked price of $220 but is being given for $180. Now since you do not have cash readily available, you use your credit card. Now let us say due to some reasons you are able you only pay 15 $ per month back to the credit card company. Plus, you pay late once, and you're charged a $30 penalty fee for missing the payment date.

At this rate you would take 16 months to pay off the bill and considering that the interest rate is 17.9% finally you would have paid $228.26. More than the original price! See this is what is happens with the other articles you buy.

According to a 1999 study by the Consumer Federation of America, expanding credit card debt is quickly becoming one of the most severe threats to academic success on college campuses. This study, conducted by sociologist Dr. Robert Manning, a visiting professor at Georgetown University, suggests that credit card marketing "on college campuses poses a greater threat than alcohol or sexually transmitted diseases." Dr. Manning's study estimates that nearly 20 percent of students may have credit card debt in excess of $10,000.

Credit card can easily put you into debt if not used sensibly. Use money in your daily transactions and use credit card only when the need arises. Charge only the amount you can pay off in full each month and try to pay more than the minimum amount recommended per month by the credit company. So if have been putting off payment of bills for some future date, remember 'payback time' is coming!