The Good, the Bad, and the Ugly
With credit cards, you don't have to carry cash or your checkbook around with you. You can make purchases over the telephone or the Internet. You can reserve cars and hotel rooms, or have recurring expenses automatically billed to your card. You can buy things you need that you once would have had to wait years to obtain while you saved your money. You can cover unexpected large expenses such as major auto repairs that once may have thrown you into a tailspin.
But the same cards that provide great convenience may become the means by which you are enslaved to debt, as charges you make become grossly inflated by high interest rates. As your debt grows out of control, it may even outlast the purchases that created the debt in the first place.
The Appeal of Credit
Young people today are impatient to live the American Dream, but the very tool they attempt to use is the tool that most often keeps them from attaining the dream: credit cards. The message of credit cards is one of instant gratification — you can have it all now. Credit cards can make it seem as if you're not spending real money. But once you get too deeply in debt it could take you years, or even decades, to get out. In the meantime, your real dreams will be on hold.
In 2006, the average American household had roughly $9,000 in credit card debt. This represents a 250 percent increase in ten years, and bankruptcies have kept pace. According to a Federal Reserve Board study, consumers owe more on their cards than they do on student loans.
On the Bright Side
Despite the risk of turning credit card use to abuse, it's possible to use credit cards wisely. A credit card will allow you to establish credit so when it's time to buy a house or a new car you qualify for the mortgage or car loan. Keeping your debt manageable is the most important thing you can do to get on the road to financial freedom.
