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Disadvantages of Credit Cards

The real problem with credit cards is how easy they are to use!

Way too tempting

It is so easy. It doesn't even feel like you're spending money. Do that enough times in a month, and SURPRISE! Look at that credit card balance! Where did it come from? It came from all those not-so-big purchases you made over the month –

  • That pair of shoes you just couldn't pass up. $79
  • The night you were dying for pizza after you'd gone rock climbing. $24
  • That great sale! What did I buy? $65
  • Those two new music CDs that you just couldn't live without. $29

Suddenly you're in debt. And you don't have the $197. So you pay $60, all you can afford. What happens next month? The $60 you paid the credit card company has made you short on cash this month — so you charge more, and your debt grows larger.

To see how you handle credit, Take the Spending Challenge.

Carrying a balance

You may intend to always pay your bill in full and on time. The plain fact is that most of us carry a balance (owe money) from month to month. The convenience of credit can be very hard to resist.

Getting out of debt

So what's it like to be in debt? Let's say that you find the perfect winter jacket. What luck! It's marked down from $220 to $180. That's a $40 savings. You don't have the $180 right now, but you hate to pass up the sale, so you charge the jacket. You decide to pay for it over time.

Because you work only one day a week, you can't afford large monthly payments. But you can pay $15 every month and still have some money left over for other things. You faithfully pay the $15 each month, but the months seem to drag on forever. Plus, you pay late once, and you're charged a $30 late fee for missing the payment date.

Although you've bought the winter jacket in November, it takes you 16 months (that's two winters, a summer, and a spring) to pay off the purchase! At a 17.9% interest rate and with a $30 penalty fee, guess how much you paid for that "sale" jacket? $228.26. That's more than the original price! Those finance charges really add up.

By the time you're done paying for the jacket, you'll be ready to buy a new one. See how good you are at estimating the cost of credit.