When used like a debit card, credit cards often don’t cause any problems. You just spend less than you earn and pay it off at the end of the month, rather than taking money out at the time of each purchase, as you do with a debit card. It’s the same general principle.
Where people get into trouble with cards is when they make simple mistakes that can quickly lead to overwhelming debt. These cards are a risk, as they’re designed to make money and that often means putting consumers in a problematic position. Some of the mistakes people make include:
- Paying the minimum every month, which means you pay interest on whatever is left.
- Leaving a balance on the card, rather than paying off the statement balance each month.
- Not knowing what fees the card comes with; for example, some cards come with an annual fee and some do not.
- Forgetting to pay the card off on time. Just one missed payment can generate a lot of extra debt.
- Putting more on the card than they can actually pay. If you make $5,000 a month and you max out a card with a $10,000 limit, you may start a cycle of debt.
Often, credit card debt starts out small and then spirals out of control over time. As it increases, it becomes overwhelming and what felt like a minor issue before begins to take over all of your finances.
When this happens, it is important to take a step back and really consider all of the options that you have at your disposal.