Responsible Spending with Credit Cards

Credit cards

The findings of its yearly survey of consumer credit card behaviors was just released by Consumer Reports. One shocking statistic from that report shows that about 12 million consumers are still in debt from holiday shopping from the previous year. The flood of accessible loans and credit of the previous ten years allowed consumers to easily be approved for credit cards and also enticed many to rack up balances. As a result of the crisis in the credit industry, banks are now more risk averse and are tightening the lending reins. Many consumers are turning to the use of credit cards, in the absence of once available loans and lines of credit. When credit cards are used in this manner, it is tempting to let the balances ride and increase debt.

There are many advantages to using a credit card, especially if you are making an expensive purchase. For one, you do not have to carry a wad of cash in your wallet. Unlike paying with cash or check, credit cards give you some protection. If a charge that you did not make appears on your statement, you are most often not responsible for paying anything more than $25 or $50 of that charge. It is also easier to dispute issues you may have with customer service or a product, if you paid via credit card. The world of online shopping would not have been possible without credit cards. Credit cards allow you to quickly purchase something and have it delivered to your door. You do not have to hassle with waiting to send a check or money order. An added bonus is that everything you buy with your credit cards can be easily monitored, itemized and put into budget tracking software. You have to remember to keep and file receipts and invoices when you use checks and cash.

The ease of use and protection offered by credit cards make them a preferred payment method for many consumers. But credit cards come with a dangerous allure. It is all too easy to pay the minimum payments each month and keep increasing the balance. In a perfect world, all purchases made on a credit card would be paid in full each month. That would incur no interest payments. Paying only the minimum payment each month means that most of that payment is interest to the bank, and does not pay down your balance. By regularly paying only the minimum payments each month and continuing to make purchases on those credit cards, a consumer can easily get stuck in a cycle of debt.

Credit cards are a very practical and convenient resource, but should not be used to pay for unnecessary things that push consumers beyond their means. Balances should be paid in a timely manner. If you responsibly purchase with and pay off your balances on your credit cards, you will also be able to handle emergency expenses more readily than if you carried balances on your cards. Only you are accountable for the balances you carry on your credit cards.