Credit cards can be a real trap, especially for young people inexperienced in managing finances. People who consider a credit card “free money” are headed for trouble. Here’s an example:
Hired as an event planner, Heather worked hard and received a promotion. She wanted new clothes, so she applied for a credit card. Heather paid the minimum monthly payment each month. Because of her payment record, the credit card issuer agreed to raise her credit limit. Heather was off to Jamaica, where she used her credit card a lot. Heather paid down her credit card debt, then ran the balance up again–again and again. Five years later, Heather owed more than $5,000–and, technically, she still was paying for her Jamaica trip. It took Heather almost 12 years to finally paid off her credit card debt! Not only did she pay triple the amount charged, she was unable to save money while paying on the card.
This is an example that may look familiar to many who look back on mistakes they made with money when they were young. The best advice: start slowly with your first credit card. A smart money management rule is to avoid paying interest on your credit card charges by paying the balance in full each month. That way you’ll enjoy the convenience a credit card can bring, but you’ll avoid unnecessary finance charges and debt that never seems to end.
