Have I got the discipline again........ (Credit Cards in general)

Member Name: hypno06

Product:	Credit Cards in general
Date:	31/12/08 (131 review reads)
Rating:

Advantages: Helps with cash flow, and you can get cashback too...

Disadvantages: Can lead to increased debt that you cannot afford to repay.

As a teenager first starting out, I thought I was pretty good with money - saving up for things before I bought them etc, and always saying that I didn't want a credit card.

Then in 1991 I was provided with a credit card from my bank - I don't think I asked for it, it just arrived.....coinciding with my husband's redundancy, so it became what we thought was a welcome relief - we could still afford to buy the groceries while he was looking for a job.

And of course, that is where the problem starts - using a credit card when you can't afford to pay it off in full each month. I agree that they are an excellent thing if you pay off each month, and avoid interest charges - being able to keep your cash in a high interest account until the bill is due, and even getting cashback simply for using the card, but the harsh reality for many people is that they are spending money they cannot afford to repay - ever.

Over the years we fell into the classic 0% balance transfer trap, where we would transfer our high rates of interest balances to the 0% with the intention of closing the old card right down, and would then have some emergency or other coming up, and would end up spending on the old one again........

We did have some genuine emergencies, and big ones at that, so our credit card expenditure was not all frivilous shopping trips and exotic holidays, but even so, the balances ended up being ridiculously scary.

The credit card companies don't WANT you to pay off in full each month so are cunning in offering what you think is a good deal eg pay off just 2% of your outstanding balance, but when you actually add in the interest payments, you are only reducing your capital owing by £5 a month - how on earth can you pay off your debt at that rate! We did some sums on one of our cards and it would take us 325 years to repay at their minimum rate! How can that be allowed to happen!

No-one forced us to take out credit cards, and no-one spent on them except us, so I don't pass the blame on to anyone else, but I do wish they had not been so easily accessible, then we would have HAD to manage - good times, and bad, and would not have put ourselves under some pretty big debt related stress over the years.

Thankfully we are now clear of all credit card "debt" - we each have a card with a low limit, that we use for groceries and fuel, and we pay it off in full each month without fail.

I do hope that the current credit crunch makes it more difficult for people to get credit cards, and that the banks revert to responsible lending - when I first started out, cards were only issued to those with a certain level of income and it was a sign of your "wealth", just a few years later, and credit card companies were prepared to lend to those who were not even in employment........I hope we can take a step back to more sensible thinking - both credit card issuers and consumers alike.

When used carefully, credit cards are a very positive thing, but when the line is crossed, it can be a very destructive path........beware.

Summary: I never want to "go there" again.....