Minimum Payments and Credit Cards
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by: barrywaters
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Word Count: 511
The findings of its yearly survey of consumer credit card behaviors was just released by Consumer Reports. One shocking statistic from that report shows that about 12 million consumers are still in debt from holiday shopping from the previous year. An increase in available credit the past decade has made it very easy for consumers to have multiple cards and has lured many into spending beyond their means. As a result of the crisis in the credit industry, banks are now more risk averse and are tightening the lending reins. Many consumers are turning to the use of credit cards, in the absence of once available loans and lines of credit. When credit cards are used in this manner, it is tempting to let the balances ride and increase debt.
Credit cards are a part of everyday spending for various reasons. For one, you do not have to carry a wad of cash in your wallet. Credit cards come with some safety nets too. If someone fraudulently makes a purchase on your card, you usually are not on the hook for more than $50 of that purchase. You can also settle disagreements over inferior products or services charged to your credit card. The world of online shopping would not have been possible without credit cards. Credit cards allow you to quickly purchase something and have it delivered to your door. You do not have to hassle with waiting to send a check or money order. An added bonus is that everything you buy with your credit cards can be easily monitored, itemized and put into budget tracking software. You have to remember to keep and file receipts and invoices when you use checks and cash.
The convenience and security of credit cards have made them a common spending mechanism. But credit cards come with a dangerous allure. Many people only make minimum payments and continue to spend. In a perfect world, all purchases made on a credit card would be paid in full each month. That would incur no interest payments. Paying only the minimum payment each month means that most of that payment is interest to the bank, and does not pay down your balance. When consumers do not pay the balances on their credit cards in full, therefore, it is not difficult to increase debt.
Credit cards are a very practical and convenient resource, but should not be used to pay for unnecessary things that push consumers beyond their means. Payment schedules should be followed to avoid fees, and balances should be kept within responsible ranges. If you responsibly purchase with and pay off your balances on your credit cards, you will also be able to handle emergency expenses more readily than if you carried balances on your cards. Remember that the credit cards are in your name and you own the balances incurred on them.
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