Problems When Using Credit Cards for Everyday Items

Problems When Using Credit Cards for Everyday Items

Falling into a debt trap has become increasingly common as the global recession has taken hold and limited growth prospects in many regions around the world.  But it is important to understand the various ways consumers will often abuse their credit cards in ways that only hurt themselves (and their credit scores) in the long run.  One of the most common problems occurs when consumers pay only their minimum balances each month.  This has drastically negative implications in terms of the interest charges that could increase as long as you have a revolving balance.  But there are other problems that credit card borrowers create for themselves as well.  And some of these destructive behaviors are seen in activities that are much less obvious in the grand scheme of things.  

Over-Using Credit in Daily Purchases

One less-understood problem occurs when borrowers over-use their credit cards in most of their daily purchases.  When you place everyday items on credit, it can be difficult to keep track of what exactly is being spent, and how much credit card debt is being accrued over a given period.  "When borrowers use their credit cards for everyday purchases, said Ann Gorenkova, markets expert at NordFX, “it is easily to be lulled into a false sense of security.  Many borrowers start to forget about the true state of their finances and overspend.”  

In cases like these, it is generally better to just use your available cash (with perhaps your debit card) for things like groceries, utility bills, and other monthly necessities.  The reason for this is that interest requirements can accumulate quickly and if you don’t pay off your balance in full by the end of the month, a relatively inexpensive item can turn into an expensive item once interest payments are factored into the equation.  It is highly important to implement tips for saving money, something I have written about previously.  For borrowers that have revolving debt on their accounts, the main goal should be to keep as many times off your credit card as possible, and one of the most certain ways of doing this is to keep daily purchases off of your account as much as is possible.

Common Mistakes are Avoidable

Falling into the common debt traps might seem inevitable once they start to occur.  But the fact is that nothing is farther from the truth.  Once you identify some of the common pitfalls typically seen, it becomes much easier to avoid obstacles before they actually start to have a negative effect on your account balance. So, in addition to avoiding mistakes like only paying off your minimum balance at the end of each month, you should also be prepared to keep daily purchases off of your card as much as possible.  This will help you to avoid developing a false sense of security (making you think you have more money than you actually do) and limit your interest payments down the line.