by Kevin Bradley

Created on: January 12, 2009

In order to build up your credit score you need to prove to potential lenders that you are a responsible borrower. The easiest way to do this is to take out a credit card and make some purchases on the card and then repay the amount borrowed in full before any interest becomes payable. That is the theory; however, most people succumb to temptation and give in to their impulsive buying urges or get tempted to spend beyond their means by unscrupulous credit card companies.

It is the beginning of the end when you have access to credit and are not able to exercise self-control. If you have consistently repaid your outstanding credit card balance each month and managed to avoid paying any interest, then it is even more important to maintain your self-control when the credit card companies start to increase your borrowing limit and lowering your annual percentage rate of interest (APR).

A credit card was never designed to be helpful for a consumer, instead, it was designed to make the issuing company significant profit and to trap the borrower into a lifetime of interest payment. Even when a consumer is thoughtful and considerate on every purchase made on a card, the credit card company will only make money if any outstanding balance remains on the card and interest becomes payable. It is therefore in the interest of a credit card company to entice consumers to spend on their credit cards and to only make the minimum repayment.

It is all a marketing trick and the majority of society is tricked into wrongly thinking that credit card debt is affordable. If you fall into the trap and find yourself only making the minimum repayment on an outstanding balance, you will find yourself perpetually indebted to a credit card company and virtually trapped paying mainly interest. It can take up to 40 years to repay a $5,000 credit card debt if only ever repaying the minimum payment.

Credit card debt repayment is also structured to ensure that the most expensive debt is the last to be repaid. This can happen in times of emergencies if you take out a cash advance. In addition to a higher APR for cash advances, there is normally an associated cash handling fee and the debt lingers on your card until all other debt has been repaid. This means you could be paying interest on a $500 cash advance for up to 40 years and will have repaid $2000 or more on that advance by the time it is finally paid off.

In order to avoid falling into the credit card trap you will need to exercise a great deal

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