While they may be good personal finance management tools, credit cards can lead to financial ruin. It is not by chance that many of the serious financial problems we deal with at Janie Crawford have associated at least two to three credit cards. Unfortunately, financial desperation drives many people to use a credit card to pay for another card … and we get into a spiral of over-indebtedness.
A Wolf in Lamb Skin
Credit cards are sold alerting to the great potential that they have associated. From insurances (which turn out to be very interesting but unknown), miles for travel, discounts on purchases and something really interesting that are interest-free credit periods. All “advantages” that serve to beautify something that can be really dangerous to your personal finances …
Very High Interest Rates
The first major disadvantage of credit cards is their interest rate. Of the total credits available in the market, the rates of credit cards are the highest in the market. If in credit housing the rate is currently 2%, credit cards are around 15% … on credit cards it is almost 20%. That is, in about 5 years would double the amount owed.
Beware Of The Commissions
A second disadvantage of credit cards (common to other products) is the weight of commissions and charges. We suggest that you be very attentive to this heading because the financial institutions are very focused to collect these values, being common to change the rules in the middle of the game. From the list of commissions, we draw attention to the commissions associated with raising cash on credit (known as cash advance). It may be comfortable … but being comfortable has a really penalizing commission.
Beware of Consumerism
Credit cards are one of the visible faces of consumerism. We do not mean by this that all people who use credit cards are consumerists, much less that all purchases made are unnecessary or superficial. However, families typically have the financial capacity to meet the major expenses essential to their lives. When other expenses appear and after the money is exhausted on the essential expenses … comes the credit card to help.
The purchase with the use of cards (whether credit or debit card) has the ability to “dematerialize” purchases. That is, who buys has a less uncomfortable sensation because it does not have to deliver money . Some studies say that credit card purchases lead to spending more than 10-15% higher than those you buy with cash. If you want to start saving, why not try to make the cash purchases?
Do You Really Need a Credit Card?
Having a credit card in the wallet is an incentive or a strong temptation . So, if you see interest in having one of these cards (perhaps because you have hired one in the follow-up to your credit home) why not leave it at home? If you have an urgent and priority expense you will certainly have time to go home and, calmly, decide whether the purchase makes or does not make sense. Whether or not it is priority and urgent. Do you have more than one credit card? How about ending one of them and saving only what has the interest rate and the lowest commissions?