Credit cards can be useful for some things if they are used properly. However, people can get into trouble if they start charging purchases they cannot pay off in full each month. If you don’t pay off the balance owed each month you will incur finance charges based on the balance you owe.
If you make late payments or no payment each month you will also incur a late fee charge that can be as much as $39 a month. As the finance charges are added to your balance, the amount you owe will continue to rise. Unless you can make considerable payments to your account it will be easy to be crippled by the debt.
Some people think they are doing alright financially if they can make the minimum payment due on their credit cards each month. In most cases, depending on what your interest rate is, the minimum payment barely covers the finance charges. So if you make only the minimum payment you will not pay much towards the principal. By doing this it will take you many years to pay off the balance, even if you would not charge any other expenses on the card.
By paying the finance charges for many months or years, you will end up paying two or three times the original prices of the items that you charged. Even if you think you are saving money by purchasing items on sale, if you charge it to your credit card and are not able to pay off the balance in a month or two, you are not actually saving any money.
People also charge items to their credit cards that they probably would not normally purchase in order to get reward points. Many reward points are never redeemed. In many cases people charge items to get reward points for trips and other items they could not afford otherwise, but then they have trouble paying off the balance on their credit cards.
Studies have shown that many people spend more when they use credit cards than with cash. It is more emotional and you feel the spending more when you hand over cash.
Beware of using credit cards if you do not have the funds available to pay off the balance in a month or two. If you are planning on only paying the minimum amount due or a little more, it will not take long before you find yourself in a serious debt problem.