Credit Cards are the cherries conveniently placed on top of our ever-growing loans.
Credit cards are a fact of life and they are not going away by themselves anytime soon.
Since the first credit cards were issued by American Express and the Bank of America in 1958, their use has exploded, transforming the way our economy functions. Today, one or more credit cards live in almost every adult American’s wallet.
The U.S. Census Bureau estimated that 160 million of us used 1.17 billion credit cards in 2012, tallying up $870 billion in purchases.
Credit cards are essential tools that allow us buy things without having to carry around large amounts of cash, and to borrow funds for stuff we need now, but can only pay for later. When used wisely, credit cards can help us build a framework of financial stability and order. When misused, they become a wrecking ball, destroying the economic structure of our lives.
As with any tool, they’re only valuable when they are utilized the right way, cared for while they are being used, and then put away safely when they’re no longer appropriate or needed.
You should use your credit cards for two main purposes: Pay for things you know you can afford and build a good credit history so that you will continue to have the ability to borrow money when you need it, especially for large expenses like a car or a home.
You can put your credit cards to their most advantageous use when you make a firm commitment to pay off your monthly balances in full. Credit card companies make their profits by charging vendors for processing transactions, and by charging you, the card user, high interest rates, various fees, late charges and penalties. When you pay off your accounts completely, and in a timely manner, you are, in effect, using your cards and the services they provide, for free.
You are also creating the most beneficial credit history possible, which will guarantee you a better credit report and higher credit score. That means you will continue to be considered a good risk by future lenders willing to offer you the best available credit terms and interest rates.
Your credit cards will harm you when you use them recklessly, believing that they represent free money rather than money you will eventually have to pay back.
If you are using your credit cards to pay for things you truly cannot afford, it is time to put them away. If you are using one card to pay off the debts on another card, you need to stop using them in this kind of self-defeating cycle, and put them away. If you are cranking up huge interest payments and late fees every month, you need to stop using your cards immediately. Put them in a drawer and hide the key.
Don’t let your credit cards turn into broken utensils that do more harm than good. Use them wisely and responsibly and they will remain worthwhile economic tools. Abuse them and they will cut and bleed you of your economic lifeblood like a dull and rusty knife.
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Al Krulick is an award-winning journalist with dozens of years of experience. He writes and blogs for Debt.org.