Financial Tips | Debt Management

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1/14/09

Are Credit Cards Attractive?

One of the biggest financial problems is people using credit irresponsibly. Many people think of credit as a second bank account. Basically, they spend until the card is "maxed out." These people do not realize what they did until the credit card bills start coming in. The minimum payments do not seem like much, but after six months of payments have barely reduced their overall debt, the realization of the debt problem occurs. They realize the mistake that they have made but only after it is too late.

This situation occurs because credit cards are very appealing. People get a feeling of power and success when they use their credit card. They seem to forget that every dollar that they charge must be repaid with interest. As such, the problems discussed above come to fruition. The interesting part about the appeal of credit cards is that many people do not learn their lesson after discovering that they have a debt problem. Instead, these people obtain more credit cards and "max out" those cards too. Eventually, the debt becomes so overwhelming that the only viable option is to file for bankruptcy.

In order to make credit cards more attractive, credit card companies have started making credit cards out of other materials instead of plastic. Additionally, credit card companies have added "cool" colors and personalization options to credit cards. Most recently, one credit card company allows its customers to put any picture that they want on their credit card. The theory is, if a credit card company offers an option to personalize the card, more people will apply for and obtain the card. Additionally, because it is personalized, the card will be used more often. Funny enough, this theory most likely has more basis in fact than in theory.

The worst thing you can do is fall for clever advertising or obtain a card merely because it looks good or is "pretty." You should obtain a credit card with no annual fee, with a low, fixed interest rate, and with a high credit limit. If your credit card does not have these basic things, it does not matter how good it looks because it is not a good credit card.

The point is, even though credit cards can be attractive, you have to avoid being seduced. If you become seduced by credit cards, you may fall victim to reckless spending and card misuse. This can lead to same very unsavory financial situations.

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