The enticing trap of credit card debt

It has never been easier for people to live well beyond their means than it is today. Credit is easy to obtain, and in a society obsessed with material gain, credit is sought and used on a basis that is so regular even financial watchdogs are beginning to sound warning bells. The average savings for the United States and Canada over the next few years are actually expected to go into the negative figures, as more people purchase what they cannot afford.

One of the main contributors to this phenomenon is the credit card. Credit cards are very easy to obtain, and most people get them thinking they will be handy in an emergency. This is the case, but what the credit card companies know is that it will not be long before you use that piece of plastic to make a purchase that is certainly not in an emergency situation.

One way that credit cards have succeeded in getting a flood of people to spend beyond their means is to make credit cards available everywhere. The rise of the Internet has fueled a massive increase in the use of credit cards, as it is often the sole means people have to make an online purchase. Anytime you make a credit card purchase, however, there is the chance that you will forget about it. Statements that come out once a month are a great way for credit card companies to make sure their customers rack up the bills to the point where they will not be able to pay them all off in one shot, and thus gain the hefty interest.

Credit card companies also use promotional gimmicks to entice customers to charge all of their purchases on their cards. Most credit card companies have teamed up with auto dealers or some other company in order to give customers points towards future purchases. Visa has the well-advertised “Win What You Buy” campaign. People can be so tempted by this that they place all their purchases in the Visa in the hopes of getting it all for free. The prize, however, is rarer than winning the lottery.

Staying out of credit card debt requires using that piece of plastic frugally. If you don’t have the money in the bank to make the purchase, do not do so with your credit card - it will only cost you more money in the end. If you do encounter an emergency and have to make a payment on your card, pay it off as soon as possible. If you can’t do this, look into getting a line of credit from the bank. This may seem like “stealing from Peter to pay Paul”, but banks often offer a lower interest rate than a credit card, and the advantage of a line of credit is that banks automatically deduct an amount every month out of your other accounts toward your debt. Credit card companies are just as happy to have that debt grow and grow.