While credit cards are often the norm when paying for all things, great and small, they certainly do no favours when helping people out of debt and can even send them further into the downward spiral. If you truly want to help yourself and get a hold of your financial situation, you will want to avoid using credit cards completely. Here are five reasons why you should avoid using credit cards at all costs.
1 – They often charge large Interest Rates
When advertising credit cards, there is often a small message at the end stating the interest rates of the card. If you listen carefully, you might have thought that the rates were incorrectly quoted, but in all honesty credit card interest rates are ridiculously high. There is no such thing as ‘free money’ and owning a credit card in fact will cost you more money than if you had bought it with cash in the first place. Some ‘smaller installments’ can add up to half again the price you paid for the initial object or service, and this is sometimes carefully hidden in smaller packages so that you are less likely to notice.
2 – There may be Hidden Fees
On top of interest rates, some credit card companies are eager to charge hidden fees to late payers, or people who use their credit cards abroad without the proper notification. While this may not apply to everyone, it is important to read all the small print so that you don’t get slapped with a hidden fee that could have otherwise been avoided. However in some cases these fees are unavoidable and are just another added ‘perk’ of owning a credit card.
3 – They can negatively affect your Credit Rating
A poor credit rating or a bad credit rating will seriously affect your success in applying for credit cards and loans later in life. It may even have an effect on your success in getting a good mortgage application and this obviously has serious ramifications. Buying a property is often one of the most important investments you will make in your lifetime, so if you are unable to get a mortgage then you are relatively stuck in rented or familial accommodation for the time being, and in many cases this is less than ideal. Avoid gaining a poor credit rating by avoiding credit cards where possible.
4 – Hidden fine print can cause issues
How many of us actually read the fine print? The fine print is often long-winded, drawn out and full of legal mumbo-jumbo that can make it very hard to follow, but with contracts such as credit cards it is essential to read the fine print. Some credit card companies may write in the fine print that when filling out an application for a credit card, you agree to take whichever of their credit cards they deem most appropriate and it is not always the one you would have selected.
Other fine print documents will state that that ‘fixed’ interest rate you were so keen on getting is fixed only up until they the company decide to change it. In many cases the company will give you around two weeks’ notice that the rate is due to go up, but how many people will also spend time reading any notifications that state ‘changes to your account’? We can sometimes drop ourselves in it, but it is essential that in the case of credit cards, we read all documentation attached to them so as not to be caught out.
5 – They encourage impulsive spending and living beyond your means
The way credit works is that you buy for something now and pay later. While this is a very attractive prospect, in all reality it is making many people live beyond their means, by buying several things now and then paying for it on credit. It may seem like a great idea but once the bills start rolling in later, you won’t be smiling. If you pay for something with cash and you don’t have enough money to pay on the spot, you won’t buy whatever it is you are trying to buy. However on credit, you can buy whatever you like and this leads to making reckless and impulsive decisions that we can regret later.
By avoiding credit cards you can avoid getting into the downward spiral of buying things you can’t yet affords and then having to fork out even more money layer on sue to late fees, interest and other hidden fees. While loans in themselves are great ways of making large purchases that you can then pay back in smaller installments over a longer period of time, to make small purchases on credit that you have to pay back later is never a wise choice, as it is so easy to forget about such small purchases. Fast forward to one month later and all those purchases come back to you, plus interest. It is better to avoid it altogether and only buy what you can afford on the spot.
It might seem like a boring way to live, but you really don’t want huge bills and debts hanging over your head. With people able to get credit cards from a younger and younger age, these people lack the ability to make good financial decisions and then often land themselves in crippling debt before they have even begun to save for a property or a car or anything they will want later in life. It is important to be able to properly educate these youths on proper financial planning, before it is too late.
