Financial Tips: How To Avoid And Reduce Credit Card Debt

Credit cards have their advantages, but also cause problems. Stop spending before debts get out of control.

It seems that surely everyone has heard about the evils of credit cards. We are warned constantly that our spending-centric culture is lining the pockets of credit card company CEO's and leaving millions in debt. How many have seen those commercials on debt consolidation? They seem to be coming more and more common as we spend more and more money that we don't have expecting to have (some of) it in the future. Everyone surely knows someone who seems to collect credit cards""not just Visa, MasterCard, American Express, etc., but also Sears and Wards and a number of other "store" cards. Those who don't have any credit cards are constantly bombarded with offers (those who do have cards are as well). What is the solution? Are debit cards a viable alternative? Why get a credit card in the first place?

Different people have different reasons, the three top being convenience, incentives and, of course, credit. Nobody wants to carry around $1000 in cash everywhere they go. Nobody wants to estimate their grocery purchases before they leave and then carry the appropriate amount of cash. Credit cards are great""just carry this card around with you all the time and it takes less room than cash and doesn't require exactitude (as long as the purchase is below your limit you don't need to worry about having enough cash to buy an article). In fact, you don't even have to have the money to spend it! And that, my friends, is where we get into trouble. Many companies offer cash back or certain numbers of frequent flyer miles, etc., aimed at getting people to use their cards. These can be fabulous deals, but only if you have the self-control not to overspend and to pay back the amount in full at the end of the month. If you do this, you pay no interest and still get the cash back/air miles.

Are debit cards a viable alternative to credit cards? Yes and no. Yes, inasmuch as you don't have to carry cash or a checkbook""are credit card-sized piece of plastic becomes your direct link to your checking account. No need to tabulate planned expenditures for the day and carry around wads of cash (that could easily get you robbed). Unfortunately, that last property of credit cards, the dangerous one (spending money you don't have) actually keeps debit cards from being complete replacements to credit cards. What if your car breaks down in the middle of nowhere and repairs cost thousands of dollars? Well, you can borrow money from friends or family using Western Union or some other similar place, or, for more convenience, simply "charge" it to your credit card. In a sense, the very thing that makes credit cards so potentially dangerous makes them indispensable. After all, you can't make that repair using a debit card if you don't have enough money in your account.

What is the solution? Responsible spending. If you think you will be tempted to spend more money than you have, then don't get a credit card. They say there are only entities you really, really have a hard time with if you pay late: the IRS and your credit card company. If you can remember not to spend more money than you will be able to pay back at the end of the month, then you are fine with having a credit card. As previously said, they are great for emergencies and for the incentives they offer. Always pay off the entire balance though, because if you don't interest (and maybe late payments) accrue (after the introductory period the rates usually run 20-25%). Again, be careful, be responsible. If you are, then credit card "evils" are no worry to you.

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