Oct. 18 – Credit Could Ruin Your Life, or Charm Your Wife

Gay Lynn HillBell Ringers, Economics(BR)

October 18, National Get Smart About Credit Day.

The credit card system is kind of like a superpower. It gives you the ability to make large purchases on the spot without knowing if you have the money to pay for them or not. While this sounds amazing, as with any superpower it’s vital to remember that with great power comes great responsibility.

Average Americans have more than $6,000 of credit card debt. In a survey by creditcards.com, 35 percent of respondents said they don’t think they’ll ever get out of credit card debt.

The first rule for credit cards is that the only responsible way to use them is to pay off the balance in full each month. Your credit limit should not be viewed as an open-ended source of funds, but rather as the upper limit of the size of purchase you can use it for. No matter how large the purchase, you should only use a credit card for amounts you can pay before the end of the month.

You should never use a credit card to buy, for instance, a vacation, and then pay off gradually. Instead, you should save the money in advance, and pay the costs immediately with money you’ve saved. While this might postpone your vacation by a year or two, in the long run, you’ll be far ahead. You might spend five or more years paying off a vacation you had in the past. During that time, you could take two or three vacations, instead, if you don’t buy with credit and then carry the balance.

Now, life happens, and many of us sometimes find ourselves facing emergencies where we need money, and don’t have it. In that case, having an unused limit on a credit card can be a life saver, preventing even less financially or personally-sound decisions. Just be sure you recognize the downside to doing so, and be sure the situation is really an emergency. One of the most painful financial experiences any of us faces is dealing with out-of-control credit card debt.

In the video below, note how painful and difficult it was to retire the debt on a single credit card purchase, and how hard to credit card companies work to get you in debt!



Questions:
  1. Do you have a credit card? Do you think you use it responsibly?
  2. What kinds of things do you think people use credit for that they shouldn’t?
  3. What do you think the advantages and disadvantages are of using a credit card over a debit card?

Image Citation:

13, July 2018, Terry Crews Credit Card. [Digital image]. Retrieved from <texashillcountry.com>.