Credit Hazards That Can Cripple Your Finances

One of the hazards of having a credit card is that rising interest rates may cause you to spend far more money than you intended; for instance, that six hundred dollar laptop may actually cost you fifteen hundred dollars if you only pay the minimum payment each month. This is how the credit card companies make a profit.

There is a sense of false perception when using credit cards because it doesn’t seem like you’re really spending any money until you get the bill, and by then it’s a little too late. Having a credit card and not using it doesn’t seem logical to some people and temptation is everywhere. Credit cards allow you to spend money even if you don't technically have it at the moment. One of the things young people are told when trying to establish credit is to start out with a credit card and to use it wisely. That’s not wise advice to give to someone who has never had a credit card before or is not disciplined enough to refrain from impulse buying. Many college students and teens are in serious financial debt now because of credit cards and impulse spending.

There are consequences when you max out your credit cards and then avoid paying the bills; it’s called bad credit. A person with bad credit will have high interest rate loans and credit cards, their loan applications may not even get approved, and they may have difficulty in renting an apartment. Insurance companies check your credit before they issue you a policy, so your premiums may be higher, and you may even get denied employment because of bad credit. That’s why it’s good to stay on top of your bills; make sure you pay on time and pay them off as soon as possible to avoid a financial disaster.