by Patrick Sills

Created on: May 18, 2010   Last Updated: July 07, 2010

Play now, pay later. It sounds like a great idea, especially if you’re low in the cash reserves However, in most cases, you'll pay dearly for the privilege. When it comes to biting off more than we can figuratively chew, there is perhaps nothing worse that will put us into such a mess than that dreaded piece of plastic known as the credit card. They are responsible for millions of us going into irreversible debt and serve as a major factor in why this nation’s economy was recently in its worst shape since the Great Depression of the 1930s. While things have improved a bit at this writing, we’re still far from being out of the woods just yet.

Here’s how credit cards work: A bank or other lending institution will mail out hundreds of thousands of tantalizing offers that appear to be too good to pass up. A simple phone call activates a personal line of credit just for you. Generally, we’re talking about $5000-$10,000, depending on your history of timely bill payments. To make things more appealing, some of these institutions won’t even charge interest for six months! What better way to get that new carpeting or fix that rear main seal on your car that leaves a puddle of oil in your garage? We can even pack our bags and charge an entire trip to Disney World with these wonderful pieces of plastic! The possibilities are endless. The downside?  Your debt will also be seemingly endless once you get into the very bad habit of using credit cards.

You see, most of us charge far more than what we can pay back when the monthly statement comes. As a result, that balance snowballs as we continue to charge more and more. Meanwhile, that six months of no interest has expired, so now we’re paying finance charges on top of that balance! Soon enough, we have to cough up just as much as we do for our mortgage payments just to keep up. Eventually, this could lead to ugly situations like bankruptcy. Believe it. There are people out there who owe tens of thousands of dollars to credit card companies.

The debt gets so overwhelming that many of these overextended individuals end up settling with the credit card companies for far lower amounts than what they really owe, which results in the creditors losing a ton of money. This in turn weakens the economy.

Obviously, the best strategy is to avoid getting yourself into this financial predicament in the first place! Don’t buy anything unless you have the cash to do

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