Credit card is good only if you can control your spending (TRUE OR FALSE )

| Filed under: Personal Finance | Posted by: Editor

Many people have suffered greatly from spending more money than they actually budgeted through credit cards. Being a young adult many people caution me about owning a credit card and all the financial trouble they give.

But very few talk about all the good in it and why it is really a great thing to have when used correctly. Instead there are fears that many in my generation are being led to follow. If you think you can control yourself on spending extra money, then hold a credit card otherwise stay away from it.

Other option is to carry the card to limited places…where you think it is necessary. Many personal finance experts have been saying for years that you should stay away from credit card…because it is very tough to control your spending and they always make you spend on unnecessary things.

The biggest disadvantage of credit card is that it encourages people to spend money that they don’t have. Most credit cards do not require you to pay off your balance each month, so even if you only have N1,000, you may be able to spend up to N5,000 or N10,000 on your credit card.

While this may seem like ‘free money’ at the time, you will have to pay it off – and the longer you wait, the more money you will owe since credit card companies charge you interest each month on the money you have borrowed.

The simple advice is that credit cards can make life easier and be a great tool, but if they are not used wisely they can become a huge financial burden. If you do decide to use credit cards, remember these simple rules: keep track of all your purchases; don’t spend outside your budget; pay off your balance on all of your credit cards at the end of each month; and don’t loan your credit or give out your credit card information to anyone but reliable companies.

“Citizens should avoid making short-term credit card purchases that are disproportionate to their monthly salaries, as this ensures that they can repay their balance each month and avoid the accrual of long-term debt and interest,” according to Lewis Humphries, a researcher and marketer for UK outlet Carfinance247.

“During the peak of the recent recession, revolving credit card debt accounted for approximately 98percent of all household liability. While consumers have strived hard to diminish this debt and use their plastic wealth more responsibly, credit card borrowing has risen since May and even triggered a 4.1 percent rise in retail sales during the last month alone,” he noted.

Humphries also believes that today’s consumers must make the clear distinction between corporeal wealth and credit if they are to avoid incurring cyclical debt.

Credit card companies charge you an enormous amount of interest on each balance that you don’t pay off at the end of each month. This is how they make their money and this is how most people who patronize them get into debt (and even bankruptcy.)

Like cash, sometimes credit cards can be stolen. They may be physically stolen (if you lose your wallet) or someone may steal your credit card number (from a receipt, over the phone, or from a Web site) and use your card to rack up debts.

By: Iheanyi Nwachukwu