The Credit Card Trap

I was expecting a cheque from Shopping.com to show up at my doorsteps today. It didn’t come, which was too bad, because my Visa bill is due today. Luckily I had enough funds in my account to pay it off. One thing I have learned over the years is to NEVER run a credit card balance. The interest will kill you. Not only can you not deduct the interest on credit cards but you have to pay it with after tax dollars. So that 18% per year they charge become as high a 36% interest.

There are some who will say to just not use credit cards period. I say that is very poor advice. The proper use of credit is a very powerful thing. It’s a matter of knowing the differences between good debts and bad debts. If you always pay cash for everything and don’t buy new toys unless you have the cash in the bank then getting a credit card is a good thing. Just make sure you get the right one. I use a Visa that gives me 1% cash back on all my purchases. Since I always pay off this Visa every month I am really making money on it. However, this only works if you pay the card off every month. If I were to run a balance, the interest on the balance will kill off any income made from the 1% cash back.

The worst thing anyone can do is to fall into the credit card trap because it can take years to get out, if they ever do get out. Things start off easy enough, a charge here, a charge there, etc. You always think “I’ll pay it off when the bill comes.” However, all those little charges add up really fast and next thing you know you can’t pay the entire Visa balance off. So you start making minimum payments and keep charging, because charging for things is so easy. As you approach your limit, the credit card company increases your credit limit so you can charge more – which you do of course. That is the credit card trap. I know people who are still paying for that pizza they order four years ago. I’ve been one of them. It took me years to get out of it. Please don’t be like I use to be.