Credit cards: “Angel” or “Devil”

In 2008, credit card delinquency rates in the United States hit a four-year high, according to Equifax, a credit card analysis firm. In times of economic softness, people are often tempted to use their credit cards to see them through. Here we go over some of the major advantages and drawbacks of credit cards and show you how to use yours wisely.

There are plenty of great reasons to use credit cards. Credit cards eliminate the need to carry large amounts of cash, and many of them offer excellent rewards programs, enabling card users to earn airline miles, cruise ship rewards and other perks by purchasing everyday items like gasoline and groceries. Credit cards are also great in helping you build up your credit history, which can affect you in various areas. For example, your employers or landlords may check your credit history.

However, make sure you avoid the disadvantages of credit cards. For example, overuse. Revolving credit makes it easy to spend beyond your means. We highly recommend you to use your credit card like your debit card. Before you slide your credit card, check your bank account to make sure you have enough money to pay your debt back. Other disadvantages are credit card agreements. Credit card agreements are notorious for their copious fine print. If you want to avoid being taken for a ride by your next credit card, be sure to have your reading glasses handy. Pay attention to these things: annual fees, late fees, interest rates, minimum payments, over-the-limit fees and bounced check fees, etc.

Credit cards themselves don’t put people in debt. After all, a credit card is just a tool, and tools are only as dangerous as the people who use them. To minimize the dangers to your financial health, choose your cards wisely and think twice before using them. There are lots of places around you where you can learn personal finance. Knowing how to manage your money will be really helpful for your credit card use and even your whole life.

Reference: http://www.investopedia.com/articles/pf/06/controlcreditcards.asp#ixzz3rxP8PHOd

 

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