Are Credit Cards Dangerous?January 12, 2011 - 8:51 am
There’s a group of people who would tell you that you should never apply for a credit card. These people have often gone through credit trouble and believe that plastic is dangerous. Do your own research to figure out whether you should really stay away from them.
How Using a Credit Card Can Go Wrong?
Put almost anything in the wrong hands and it can become a dangerous weapon. The same is true of a credit card. If you’re not careful how you use them, you could easily charge up a balance that’s too high to repay. When your balance goes over your credit limit, you’re charged an over-the-limit fee. If you miss a payment because you can’t afford it (or any other reason), you’ll be charged a late payment fee.
Each month these fees are added to your balance it gets harder to catch up on your payments. Your outstanding balance grows like a runaway snowball. If you fall behind on your credit card payments by six months or 180 days, most creditors charge-off your balance and send it to a collection agency.
In the meantime, late payments are reported to the credit bureaus and added to your credit report. Your credit score will decline as a result.
Multiply that scenario several times for each of your credit cards and you can see how messy your credit card situation can become in just a matter of months.
How You Use Credit Cards Can Be Dangerous or Safe
When people say stay away from credit cards because they’re dangerous, they should instead say that you should be careful with credit cards because they can be dangerous. Not every person who uses credit cards ends up with a trashed credit score and thousands of dollars of credit card debt.
As long you charge only what you can afford to repay, you won’t have trouble making your credit card payments. That requires you to be disciplined enough to leave your credit card in your wallet or at home when you know you don’t have the money to pay for your purchases.
You can also keep your credit card payments at a manageable level by charging only a small part of your credit limit. The higher your credit card balance, the higher your minimum payments will be and that’s when your payments get unaffordable.
Make your payments on time each month to avoid late fees and late payments on your credit report. Mark your calendar or set reminders if you have trouble remembering these dates. Or, you can mail the payment as soon as your billing statement arrives. If your bank lets you make automatic payments, you can set up a payment for your credit cards.
Judge your ability to handle a credit card based on how you handle your other finances. If you’re frequently overdrafting your checking account, you’re probably not ready for a credit card. On the other hand, if you demonstrate responsibility with your budget and finances, you can practice that same responsibility with a credit card.