Credit Cards: Friend or Foe?

November 27, 2007

Is your credit card your friend or foe? Is your mailbox inundated with tempting offers, from competing financial institutions, for additional credit? Are you tempted to check out the offer, or do you drop the envelop straight into the shredder?

Have you noticed that the more credit card debt you experience, more offers flood the mail? What is up with that!? Obviously, banks are more concerned about making money than the consumer’s financial stability. So, it is up to you, and me, to make the right choices.

So, how can your credit card become your friend?

1. Travel Safety

Honestly, credit cards can be a blessing, but only if they are used to your advantage. For example, I do not like to travel with a wad of cash in my pocket. I would prefer to put the trip on the card and carry a minimal amount of paper money in my purse. If I lose the money, I am in big trouble! If my card is misplaced or stolen, I can call the company, have the card cancelled, and protect my credit from theft.

2. Reap the Rewards

My father-in-law travels frequently. To save money, he has a card with frequent flier miles added with every purchase. So, he buys groceries and pays all of his bills via his credit card. Thus, the miles add up quickly, and he saves a bundle at the travel agency and definitely reaps the rewards.

3. Establish Good Credit

For individuals trying to establish good credit, having a card is a good start. The better you can handle the credit you have, the better credit score you will achieve, and lenders will be more likely to loan money for an automobile, house, or other large expenditure.

How your credit card becomes your enemy:

A purchase here, a purchase there, and pretty soon the card is maxed out. Then, here come the bills. While the card seems like free money at the time, your purchases, plus the interest, can really bust a budget.

To get a clearer picture, exercise your Internet search engine and find a credit calculator. Put in the amount of your debt, the interest percentage rate, and the scheduled minimum payment. If you never charge another dime, I promise you will still have quite a shocker. The calculator will tell you how many months it will take to bring the balance to zero. The number of months, times the minimum payment, will result in a much larger debt than the original amount charged.

So, how can keep your card a friend, and keep from turning into a foe? The answer is simple:

Do not spend more than you can afford to pay at the end of the month!

Rack up those frequent flier miles, feel safer on vacation, and begin building your credit for the day you want to buy a home or a car. But, do not carry the credit over to the next bill. Use credit unwisely, and the card will be your foe in no time at all. Avoiding spending money you do not have and a credit card will remain your friend.

Is your credit card your friend or foe?


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2 Responses to Credit Cards: Friend or Foe?

  • Tina

    Exactly! Unfortunately, since it is so easy to pull out the plastic, many people tend to spend beyond their means.

  • Terrence

    Credit cards are most definitely my friend, but only because I pay them off in full every month.

    Credit cards are great for all the reasons you mentioned plus many more. I like it for the convenience it provides me. I don’t like to carry cash and it consolidates my spending in one place for me to see every month.

    Since I have a cash back card, I essentially save 1% on everything I buy. Further, you have certain rights when you use a credit cards like being able to dispute charges, etc. which you won’t get with cash.

    Just don’t buy anything you can’t pay off at the end of the month. Added benefit of essentially getting an interest free loan for the length of the floating period.