Credit Card

Credit Card

Everyone should have at least one low-interest, all-purpose credit card. But you should also be careful, as abusing your credit card can lead to credit card debt.

Methods to the Madness

People who have a lot of credit card debts started out with maybe one basic credit card like a MasterCard or a Visa, and then maybe a department store card too. But a lot of people get sucked in to store credit cards with their special offers of saving anywhere from 10-20% off their purchases that day by opening a store credit card. Then next thing you know, they're getting maxed out here and there. Spending $20 at one store and $50 at another means you have several small bills each month, which makes the debt seem more...digestible. It would make more sense to put all your purchases on one credit card. Then you'd only have one bill to pay off each month. But a lot of people would max out their credit cards that way. So they spread their credit spending around.

In any case, the only way store credit cards will benefit you is if you pay them off in full each month. Otherwise, the coupons you get in the mail and even the discount you got for opening the card in the first place may be worthless. See, store credit cards usually charge in the neighborhood of 19-24% in interest. So if you got something at 20% off, then you don't pay your bill in full at the end of the month, and your interest rate is 24%, you actually end up paying 4% more for the item, and that doesn't make much sense. Plus, each time there's an inquiry on your credit report that you authorize (such as when you open a store charge account) it brings your credit score down ever so slightly.

We're not saying credit cards are bad. You just have to know how to be responsible with them.

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