Credit cards may sound like an appealing option for making larger purchases, using for online shopping, or even as a means of covering your financial shortcomings before the next pay, but be warned: credit cards are often more harm than good, and here’s why.
Debt is Hard to Get Rid of
Racking up a credit card debt isn’t as simple as buying now then paying when you have the money. You’re charged interest on every spend, and you’ll have to pay off a certain amount each month and often there are other fees involved. The slower you pay your card debt off, the more interest you’re paying in the long run.Unforeseen circumstances might prevent you from having the money to meet your repayment requirements, meaning late fees, bad credit or worse – there’s no reduction or stop on payments when you hit hard times.
All of these factors mean that getting out of debt can be far more of a challenge than you expect, and it’s certainly disproportionate to the ease with which credit cards allow you to spend that money in the first place.
Late Fees and Interest
It’s so easy to make purchases on a credit card without considering how much more the item will actually cost you in the long run after all the additional and sometimes hidden costs. You’d probably think twice if you calculated the actual cost of an item after all the fees and interest that the purchase will incur.Accumulating interest makes it difficult to get on top of your debt and credit cards usually charge quite a high interest rate compared to other personal loans.
Also consider the ramifications of late payments – it’s not just fees you’ll have to wear, but your credit rating can be damaged and this could affect other financial matters down the track.
People Spend More on Credit Cards than Cash
Studies have revealed that people tend to spend 12-18% more on credit cards than when using their own money. This is generally believed to be because people are less willing spend when they can feel the effects of parting with their hard earned dollars at the checkout. Credit cards remove this feeling and don’t allow for the customer to ask him/herself “how much money have I got left?”
Increased Risk of Fraud
Credit cards are easy for thieves to use, they only need to hold the card in their hand and they can make any purchase online, or even in person. All it takes is a swift pickpocket or a lapse of concentration, leaving a bag unattended, and you’re immediately susceptible to fraudulent purchases being made in your name.
Makes Impulse Buying Easy
Rather than having to save up the cash and work hard toward your goals, credit cards allow you to make purchases with little consideration. They take out the legwork of working hard and saving until you can afford what you want, and replace it with a quick and easy approach to buying things you might not even go to the effort of saving for if they were harder to obtain, and things that you may not actually be able to afford, leaving you with a debt you may not be able to manage.If you added up all the extra costs incurred by purchasing an item on credit, you would probably be far less likely to make the purchase. Credit cards make it easy to commit to these additional costs without really understanding them, or even considering them.
If you’ve already fallen into the trap of buying on credit, the best thing you can do is stop purchasing on your card, pay off that debt as soon as possible, and cancel your card.
If you’re already having trouble staying on top of payments, you might consider looking into financial advisors or loans consolidation to help you get out of debt as quickly as you can. Always be sure to go with a provider that’s well known and offer plenty of options, for example, Fox Symes, Australia’s largest provider of debt help. It’s never too late to get help and get your finances under control. Check out the Fox Symes blog for some excellent ways to save money and fine tune your finances.
Katie is a Finance Writer from Queensland, Australia. She recommends avoiding credit cards wherever possible, but recommends the professionals at Fox Symes for assistance should you fall into debt problems.