subject: What Exactly Is Credit? [print this page] It seems that everyone has a credit card these days. It's so easy to pull out your card to buy whatever you want, isn't it? The reality is a little different.
When you use a credit card to buy something, for example a new television or a dress, the bank or store is actually lending you the money to make the purchase. This means that you will be expected to pay it back, and although you may be allowed to pay in installments, it is a better bet to pay in full each month.
Your minimum payment required each month may seem quite small compared to the total amount you spent, and often this is all you are required to pay. This may sound good if you don't have enough money in the bank, but this is where your life in debt will begin.
By using a credit card, you have already paid more for your purchase, as most credit card companies charge interest on each purchase you make. The trap of minimum payments is easy to fall into. It looks easy to pay back such a small amount, and it is tempting to make more purchases, assuming that the minimum payments will remain affordable.
More cards mean more bills, with rising minimum payments and interest being added on until they are no longer quite so affordable. The longer the bill goes unpaid, the more you will pay in interest until you owe much more money than the products were ever worth. Imagine buying a product, using it until it's worn and throwing it out. But because you've only made minimum payments, you are still paying for a product that you no longer own.
There are times when a treat can make you feel better, but if it leads to a spending spree you can't afford, it is not worth it. Try a little fresh air or some exercise instead. If you still want to spend money, look for good bargains and discounts, and stop at one purchase.
If you must, use your credit card to buy what you can afford, and avoid the minimum payment trap. Be responsible about paying the bills when they come in, and don't put it off if you can help it. If you see that your cash flow is going down, curb the spending. Remember that missing payments can affect your credit record and your ability to get credit when you really need it.
