The Danger of Misusing Your Credit Card

by Roth IRA Rules

Using credit cards is a convenient way to pay for things and a good way to build your credit if you use them responsibly. However, misusing credit cards can cause you multiple problems.

How To Properly Use Your Credit Card

The best way to use your credit card is as a convenience to buy things for which you could afford to pay cash. For example, it’s much easier and safer to carry around a credit card or two rather than large sums of cash.

Credit cards are also good to have for emergency expenses and also to use for purposes where a card is required, such as booking a rental car, airfare or hotel.

For whatever purpose you use your credit card, it’s imperative that you pay off any charges as soon as possible, Ideally, you would pay the bill in full every month.

If you must carry a balance, concentrate on getting it paid off as soon as possible to keep your finance charges to a minimum. If you regularly carry a balance, you can compare credit cards online to find ones with the best rates.

Using Your Card Irresponsibly

The dangers of misusing your credit card are many. When you use your card wantonly to finance a lifestyle that you otherwise couldn’t afford, you wind up paying a lot of interest.

Credit cards, while they may offer low introductory or “teaser” rates, will eventually have rates that are much higher than most other kinds of financing. You can find out the actual rates by checking out credit cards online.

Credit card interest rates are usually 15 to 20 percent and can be as high as 25 percent. On a $5,000 balance, that’s anywhere from $750 to $1,250 in interest charges over the course of a year.

If you rack up large credit card debts that you have trouble paying, your troubles can become magnified.

For example, if you only pay the minimum payment every month, you pay very little toward the finance charges, meaning it can take years to pay off even a small debt.

If you pay late or fail to pay the minimum payment, you will be hit with penalty fees that can be quite steep in the region of $25 to $35 a month.

Also, if you pay late or not at all, your card company may revoke any special perks you have, such as a reduced interest rate.

Perhaps the biggest danger of misusing your credit cards is the long-term damage you can do to your credit score.

When you pay late or fail to pay at all, the card company will probably report this to the credit bureaus, which in turn will cause your credit score to be lowered.

However, you can hurt your credit score simply by carrying large balances even if you always make your payments on time.

A lower credit score makes it harder to get loans and can often mean that you pay a higher interest rate on the loans you do get.

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