How to avoid destroying your entry-level life with credit card debt

"How to avoid destroying your entry-level life with credit card debt", May 25 2009

I remember how alluring credit cards seemed me when I was younger: they were symbolic of status, wealth and freedom.

I decided I was mature enough to get a credit card when I was 18. My parents agreed with my decision, but passed on two important pieces of advice: I should always pay the full amount owed and I shouldn’t buy things I can’t pay for at the end of the month. I have continually followed their directions and, as a result, I’m in a much better position than some people I know.

The primary reason why I wanted a credit card was so I could avoid paying fees every time I made a withdrawal or paid for a purchase using my debit card. When I went to university about a year and a half later, I used my credit card to pay for larger purchases essential to my education and living away from home, such as textbooks, groceries and a gym membership.

However, I decided to apply for a second card which I could use for personal spending on things such as clothes, concert tickets and entertainment. Using these cards has been beneficial as I have eliminated the aforementioned fees to my account, but in addition they have aided me in establishing a good credit rating, which I will be able to use for a much larger purchase, such as a car or a down-payment on a house.

But I know many of my peers and older adults do not recognize the detrimental qualities of credit cards and yet still continue to use them to their harm.

Credit cards are a way for banks to make money. If you do not pay the total amount owing each month, you will owe that amount plus interest of upwards of twenty percent or more. Banks make their money off the interest.

Individuals will continually use their credit cards to make purchases without eliminating their balance; thereby making them spiral further into debt and reducing their credit rating.

Even universities have started partnering up with banks. They allow banks to promote credit cards on campus, since they have such a large potential market, and sometimes the school receives a percentage of what is spent on those cards. But the schools claim no responsibly for students who face financial problems due to mismanagement.

People in credit card debt are more likely to be depressed, smoke, drink to excess, use drugs, suffer from insomnia and depression and contemplate suicide. Your credit rating follows you for at least seven years or more, so this can have an effect on your ability to buy a car or secure a mortgage for a house.

If you are someone who carries credit card debt from month to month, you need to start making changes or you could be thousands upon thousands of dollars in debt in only a few years. Cut your frivolous spending as much as possible and put as much of your income as possible against your debt. Cut up your credit cards to get rid of any temptation you may have to spend.

Although credit cards have positive qualities, they can have a high cost if you’re not careful. Make sure you know your own financial capabilities, willpower and maturity before you choose to have a credit card. If you don’t have the money in the bank, don’t buy it.