by Kevin Osheer

Created on: July 07, 2009

Credit cards have almost become a must-have for people living in this century. Without a credit card it makes most online activity much harder. It also prevents you from being able to join many online programs such as an iTunes account. Credit cards also have an advantage over cash because cash is much worse when you have it stolen. Also credit cards are faster to use. Credit cards also allow you to buy things now that you can't pay for until later.

While there are many benefits to having a credit card that make perfect sense, you also have to keep in mind that credit cards come with inherent dangers and risk. Not paying off a credit card is the worst kind of debt you can get into. Using a credit card is essentially like taking out a small loan. The credit card company loans you the money to buy a product. However, you must pay the company for that product at the end of the month. The problem with credit card debt is the hole only gets deeper. Say you spend $1,000 on an item and your payment is $20 a month. A lot of that $20 is going to go towards the interest collecting on the debt. If you think $20 is doable you may spend $5,000, raising your payment to $100 a month. Well if you slip up and miss this payment then you could find yourself owing $150 a month and you just can't afford to pay that. The hole continues to get deeper and deeper until worst case scenario you must file for bankruptcy. While many credit card companies will be willing to let you pay smaller payments, the debt could take years to pay off.

Another pitfall of credit cards is that people tend to begin thinking of them as assets. The limit on your credit card is not money that you have, and thinking of it this way is very dangerous. People tend to spend money that they don't have just because they aren't close to their limit. When you do this your credit score gets shot. If you reach your limit each month it shows that you aren't able to handle money efficiently. And when your irresponsible spending catches up to you your credit score lowers because you aren't faithful with your payments.

The only time using a credit card is truly justified is when you have the money in another account to pay off the debt, or when you are spending a reasonable amount that you know your paycheck can cover. Credit cards are very useful in modern society, but if used irresponsibly they can financially ruin you.

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