Credit Cards and Spending

Credit cards are very convenient, and in an age when more and more stores are "cashless", there are more places to use them no matter what card network you might have. While the interest rates are high, the ability to have credit can enable spending to cover short-term emergencies or spending that can be paid back later, which is very popular. Not having some form of short-term credit can leave you at the mercy of events or dependent upon the limits of your savings, or family and friends in an emergency.

Credit card companies use credit scores to help determine the ability of consumers ability to pay back their loans, along with other data on income, age, debt repayment history and other data. The challenge that credit cards present is when they are used over the long-term to cover recurring spending or basic needs, as the interest rates are very high. If only the minimum balance is paid, then the principal doesn't decrease very much. This means that paying the interest on credit cards can take a higher share of spending, and lead to over-reliance on credit cards unless spending is reduced in order to start paying down the principal.

Managing credit is a skill you can can better at by understanding the interest rates cards charge along with any fees or penalties, and doing research or talking to a credit counseling service about budgeting skills. Debt management is a hard-earned skill that gets better with practice, and learning from mistakes is a part of that journey to reducing debt and taking care of your finances.