Credit cards: A double-edged sword

June 10, 2013 - PRLog -- A credit card is a card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. Credit cards charge interest and are primarily used for short-term financing. Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual's credit rating. Credit cards have higher interest rates, around 19% per year, than most consumer loans or lines of credit. Almost every store allows for payment of goods and services through credit cards because of their wide spread acceptance, credit cards are one of the most popular forms of payment for consumer goods and services in the world.

However, many credit cards have limits per day or per month and it’s the maximum amount that can be borrowed on a credit card without penalty. Exceeding your credit limit results in an over the limit fee. Your credit card issuer might also raise your interest rate to the default rate if you go over your credit limit.

Getting a credit card is a good source of financing and a chance to get a crack at the higher amount financial products available for housing and property ownership. However, a credit card that is regularly mis-used may be a big problem, the reason why we categorize it as a double-edged sword, instead of being used as a savior it becomes a problem causing.

The basic rule of saving money and keeping a budget is working within your premises. Don’t spend for as much as your finances can guarantee you. Sure, credit cards increase your ability to spend, but it doesn’t much guarantee you savings, except for special merchants the credit card works with in discounts and other free items. Always spend money that’s within your financial capability. All credit cards usually have a 3.5% interest rate. Imaging having a high credit limit, credit card which allows you to pay the minimum fee but you risk the interest. You would have debts skyrocketing in just a few months. The reason why it’s essential to work within your financial premises is because you can limit your use of the card, pay it in full and pay it on time.

The use of credit cards is a critical thing. Therefore, the cardholder should be aware of his payments and expenses. There are certain things that have to be paid for every month. As money is a limited one but there are so many things to spend on. Hence, one has to use the credit card wisely because for some it’s reserved for the hard times, when the cash is out they head to the credit card. And it is to mention that even the amount of money in the credit cards is limited.
In conclusion, it is essential to consider budgeting that involves understanding how much money you earn and spend over a period of time. When you create a budget, you are creating a plan for spending and saving money. Good planning helps us organize our expenses so that we have sufficient money. But remember that even with a budget, it still takes discipline and smartness to be able to enjoy life without worrying about money and debts.