Monday, January 18, 2010

The all powerful and dangerous weapon-credit card

The credit card is a wonderful development that has helped us to make cashless purchases which are very convenient and much safer for large items. In addition, it is the perfect solution when we are short of cash but need to make an urgent purchase. Despite its great contribution in making our life much easier, the credit card undeniably presents dangers of overspending and building up potential vast amounts of debt.

Nowadays, credit card companies are mushrooming in the market and constantly lowering the threshold to own a credit card. Why? Obviously the answer is that this business has to be lucrative. By getting more people to own a credit card, people will tend to use it more often compared to cash. Basically, credit card companies lend money to us and charge us an interest when making payments for our debts to them. The problem is, when we have overspent and are now really short of real cash to pay them, the interest gets higher and higher. It is a vicious cycle, as spending more than we can afford will result in more profits for credit card companies.

What happens when we are piled up with debts? The main effect will be the fear of how we would be able to continue on and repay back the money. If we choose to default, the companies will take legal action which will cause even more complicated issues. Instead of getting into this problem, the best way is to watch your spending, plan a budget and stick to it. This will save you all the headache and hassle of worrying about any debts. Live a free man and be happy!

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