Could a Credit Card Ruin My Finances?

could a credit card ruin my finances

Credit cards are very useful. They were not created just to be a colorful pretty placeholder in your wallet. You got a credit card for a reason, but that reason could very well end up ruining your finances. Most people don’t think about it but there are many ways your credit cards can mess up your finances.

5 Ways a Credit Card Could Ruin Your Finances

Credit Cards Make Impulse Spending Even Easier

You might already have a problem with impulse spending and with that shiny new card in your wallet; it’s easy to say, “Yes, I can buy that.”

Before you know it, it will be one purchase after another until you reach, or even exceed your limit. Once you’re there, you might not be able to afford even the monthly minimum payments.

If you personally do not use your credit card for impulse purchases you are definitely one of the lucky ones. The number of people that do far outweighs the number of people that do not.

Credit Cards Make Borrowing Money Easier Too

Credit cards allow you to take cash advances. Many even offer 0% interest for a set number of months.

It’s very easy to take advantage of these offers and before you know it, the promotional rate expires and you are faced with ridiculously high cash advance finance rates.

The money you borrowed is spent. Maybe you spent it on something very important or maybe you just wanted to splurge on a nice vacation.

But guess what? What you spent the cash advance on doesn’t really matter. What matters is that you now owe a lot of money.

The next option you have, one you can easily take, is to get another promotional cash advance from another credit card and use it to pay off the first one. Great idea? Not really. If you keep repeating this cycle you will find yourself spiraling down the drain of debt.

Interest Charges Add Up Quickly

Your credit card interest rate may be 11% or it may be 19.99%. Either way, the bigger your outstanding balance becomes and the longer it remains unpaid, the more you are paying in interest.

If you continue to add new purchases to your credit card even though you know you will not be able to pay off your balance at the end of the month, what will you do when the amount of interest you owe each month adds up to hundreds of dollars? I know some people that are actually paying over $500 a month just in interest. The unfortunate thing is that they still do not realize how all this credit is ruining their lives.

Credit Cards Could Compromise Your Information

Using your credit card at point of sales means you give access to your personal information. You might think it’s just a credit card number you are giving out but some hackers are so good, that’s all they need to get more.

shopping onlineBefore you know it, that credit card information you submitted online to purchase something might end up in the hands of identity thieves.

You would think that identity theft is something that couldn’t happen to you. It only happens in the movies.

In fact, thanks to the Internet, it’s happening on a daily basis, and it is easier than ever for hackers to access and sell your credit card number, without you even knowing it.

The more you use your credit card the higher your chances are of your credit card number ending up in the wrong hands. The next thing you know you have thousands of dollars in charges on your credit cards and no idea why. Identity theft has ruined many lives.

Mistreating Your Credit Cards

Late payments on your credit cards are reported to the credit bureaus, as well as over drafts, whether you are eventually paying off the card debt every month or just making minimum payments.

And each time you have a late payment your score drops. There are no grace periods either. Even paying 5 days late will get you into trouble.

While some people will never have a late payment, others may only miss their deadline a few times. Where this becomes really important is when people continually miss their payment due dates on their credit cards. This can happen for a number of reasons unfortunately the outcome is always the same – a drop in your credit score. And the lower it drops the less chance you have of qualifying for a loan or a mortgage in the future.

Let’s face it. We all need credit. We all use credit cards. The use of credit cards has been a way of life for a very long time. There are advantages and disadvantages and most of the time, the good reasons outweigh the risks. What is important to remember, whether we are talking about credit cards or mortgages or personal bank loans, is that there is no bad debt as long as you manage it properly.

 


Comments

    • DC @ Young Adult Money

      DC @ Young Adult Money 09/16/2013 5:28 a.m. #

      Based on the countless stories of people getting roped into credit card debt I think it certainly can ruin your finances.

    • Corina Ramos

      Corina Ramos 09/16/2013 6:51 a.m. #

      We have two credit cards that we use for emergencies only. We use it once a month to keep it active but we only make small purchases like filling up the both vehicles once a month. I try not to spend more than I can pay back.

      At one point we had those two and we each had our own. It took me forever to pay off a small balance of $500 because I was paying the minimum.

      We wised up, paid off cards that were trouble and just keep two. You're right in that having a credit card makes it so much more tempting to shop away, I know that for a fact. :)

      Yes having a credit card is not bad, it's how it's used that get's folks in trouble.

      Great post Sicorra! Happy Monday! Let's catch up soon :).

      • Sicorra

        Sicorra 09/16/2013 7:06 p.m. #

        It does make it more tempting to shop until you drop so to speak. It is easy to forget that it isn't an unlimimted source of money. Good for you guys for finding a way to manage your cards properly. Something that many people haven't figured out yet.

        Happy Monday Corina, and thanks :-)

    • masnr9@gmail.com

      masnr9@gmail.com 09/16/2013 8:49 a.m. #

      Credit cards are definitely not for everyone. If you can't control your spending, it is probably best not to have one!

    • Shannon @ The Heavy Purse

      Shannon @ The Heavy Purse 09/16/2013 11:42 a.m. #

      You definitely have to use credit cards wisely, otherwise you could get yourself into trouble. The biggest problem I often see if that so many consumers don't really understand how credit card debt affects them. They think it's normal and don't worry about it until it's often too late. They can be an incredibly useful tool or your worst enemy.

      • Sicorra

        Sicorra 09/16/2013 7:08 p.m. #

        True Shannon! It is considered "normal" to have credit card debt, which is so sad. It just seems to be a way of life for people, and they really do not give it a second thought until the day comes that they can't even afford the monthly payment anymore.

    • Debt RoundUp

      Debt RoundUp 09/16/2013 12:12 p.m. #

      I do think credit cards can ruin your finances. Yes, they ruined mine, but now I use them for every purchase. It is all about your mentality. A credit card is just a tool and nothing else, it is up to the person to know how to use it.

      While I do think the identity theft problem is terrible, using a credit card online is safer than using anything else. You have better protection with a credit card than you do with a debit card. The only way to protect yourself is to pay with cash and you can't do that online.

      • Sicorra

        Sicorra 09/16/2013 7:10 p.m. #

        It is definitely up to the person to know how to use them properly. And some do and some don't. I know you have paid off all of your debt quite nicely and manage your cards well, and that is excellent. We are still in the process of paying ours off. One day we too will be finished.

    • krantcents

      krantcents 09/16/2013 6:39 p.m. #

      Although I realize there is the potential for negative results, it is up to the user to do something to avoid it. I hate the idea that a credit card causes anything! It is always the user who needs to be responsible.

      • Sicorra

        Sicorra 09/16/2013 7:13 p.m. #

        This can easily relate to the misuse of other things in life.. It is the same thing with alcohol or cellphones. They don't cause accidents by people who are irresponsible with their cell phones or with drinking too much may cause an accident. People who are irresponsible with their credit tend to be in debt.

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