Credit cards: let's consider some of the dangers and pitfalls.

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Five reasons to STOP using credit cards
3 years ago
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If you ever really think about it, there are some pretty convincing reasons we should avoid using credit cards. Let's consider some of the dangers and pitfalls.

1. We spend more with credit cards. It is a proven fact that if we use a credit card instead of cash, we spend more when we shop. The mental limit imposed by how much I have in my wallet is not there. Most credit card limits are in the thousands so there might as well be no limit to what can be purchased during our weekly shopping trips ??right?

2. Credit Cards add debt to your life. No kidding you say? Well beside the obvious danger to your long term financial plans, adding debt can actually enslave you to a life that can, sooner or later, become hopeless. Debt can cause you to live paycheck to paycheck, making big payments on big interest (Bankrate has the average interest rate these days exceeds 13%) can suck you dry each payday.

3. The risk outweighs the rewards. Even if you ignore the fact that you spend more when paying with credit cards than you would normally spend, only the most disciplined of individuals pay off their balances in full each month. The fact is most people that have credit cards don't pay the balance in full each month. So paying high interest rates is a good reason to ditch the credit cards.

4. Risk of late fees is reason number 4. Whether you make the mistake, or the bank makes the mistake, if you payment isn't posted until you are past the due date, you will be charged a late fee which can run anywhere from $29 to $39 on average. Sooner or later this will happen to most card users. Side note: banks like the term ?œuniversal default.?? So if you are late on one card, the interest rate may go up on all of them.

5. One of the fastest growing crimes of today is identity theft. How many recent news stories have you heard about where thousands of customer records had been stolen? Every time you open a new credit card account you open yourself up to this danger. Once discovered you can spend hundreds of hours of personal time trying to clear up and restore your good name.

Instead of using credit cards in your daily life, there are some alternatives. Consider using a debit card instead. Debit cards work just like credit cards, offer the same protection if run through as credit cards, but don't add debt. You don't get a bill in the mail and the cash comes straight from your bank account. ?œWhat about my reward points??you say? Never fear, now the major banks offer rewards (including airline) when you use your debit card as well. How cool is that? A word of caution on debit cards, you do need to pay attention if you regularly use a debit card and make sure you have the correct amount of money in your account before you attempt to use it.

Alternatively you can always pay with cash. Sounds old fashion and it's even mocked on television credit card commercials, but paying cash insures that you indeed have the money to pay for whatever you buy. Try the envelope system to divvy up your monthly budget. This way you don't spend more than you make.

Whatever system you choose, it's clear that using credit cards add the most risk and potential for negative consequences to your life. So cut up the cards and reach for the cash or debit card, you'll be happy you did!
by Peter Zimmerman
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