Pros and cons to credit card use

By Jen Wozniak
January 29, 2009

Debt. The word itself can cause people to cringe. How much debt are you in? What about college students? America as a nation?

It’s a touchy subject and can be a very scary thing to think about. I know I’m scared of having to pay off my student loans, especially when there are so many other expenses to worry about.

Any students who have student loans are in debt until they pay them all off. Then there is credit card debt. Debt is defined as anything that you owe to lenders.

The good thing about debt is that we can afford to go to college or enjoy big ticket items, such as furniture or cars, now without having to pay for them until later. But buying items on credit can also turn out to be a bad thing.

When people take on too much debt than they can possibly handle, they could go into extreme debt and have a huge problem on their hands- one that completely disrupts their financial plans and future.

With the bad economy these days, people need to be smarter about how they spend their money. Prices are on the rise, including necessities like food, and jobs are in jeopardy. Splurging on items by using a credit card, as so many have done in the past, does not seem like the best idea any more.

At the beginning of this year, the Federal Reserve announced that in November 2008, credit card debt totaled $973.5 billion. I would definitely say that Americans are living at standards above what they can afford.

One of the problems with Americans going into debt is that credit cards are so easy to obtain. I receive credit cards in the mail all of the time. People can be irresponsible and start swiping these cards left and right, only to have the bill come in the mail and find that they are unable to pay.

When credit card bills are not paid fully at the end of the month, then interest, or a finance charge, will be added to the amount you have not paid, and will make the amount you owe even higher. This could be avoided by paying the entire bill on time.

I tried having a credit card for a store, but honestly I hated having to pay the bill when it came. I got rid of it because I would rather just pay when I buy the item instead of worrying about it later.

So, because I do not need a credit card at this point in my life, I’m avoiding it. This way I am absolutely positive that I am only buying what I can afford. Also, I know that I would tend to splurge more if I had one. Studies show that consumers with a credit card spend up to 33 percent more than if they shopped with cash.

Students who do have a credit card, however, can use them to establish a good credit report that will look good in the future if they manage money responsibly and pay bills on time. A credit report is a credit history of all of your transactions and payments.

Remember, getting out of excessive debt is a lot harder than getting into debt. However, if you find yourself struggling to pay bills, there are ways to fix the problem.

First of all, start spending less than you earn. Use the additional money to pay your bills. If you have several bills, or loans, to pay and find yourself unable to pay all of them, try to at least make the minimum required payments on all of them.

After that, pay off the bills one by one, starting with the bill with the highest interest rate first, because interest on the amount you have not paid will add up. Keep going until your debt is paid off.

Yes, credit cards and loans can be a good thing, especially for necessities. But Americans are paying for things with money they don’t have. People need to have more self control and not go overboard.

Like I said, at this point in time I do not feel that it is necessary to have a credit card. Maybe in a couple years after college it will be essential and I’ll be more prepared to handle it.

Students may graduate with debt because of student loans, but by saving and being responsible with their money, they can map out a good financial plan for their future.

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Jen Wozniak

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