Credit Cards: Emergency Reserve Funds or Life Style Guarantee?

Credit cards provide instant cash or payment and lighten the load in the wallet. Everyday people receive invitations to open a credit card even when they are unemployed with credit lines offered up to $20,000 or more. When times get tough and the baby needs diapers or the car tires, it is easy to just put the costs on the credit card. Young families that do so can end up over their head with bills, losing their homes and many marriages break up over money. So when are credit cards threatening? How can they be beneficial if they are threatening?

Credit Cards used for Emergency Funds Can Be a Life Saver When No Other Payment is Accepted

Credit cards are meant to be used as emergency funds with a pre-established, but often high interest rate. In emergency situations where no other means of payment are available, credit cards are very useful, especially if they are paid off as soon as possible.

Credit Cards used for Establishing Credit History Help

When home buyers buy a new home, mortgage lenders prefer a great credit history where payments are made on time or earlier and when the balance goes to zero often. Residence at a single address and utility bill payments made on time also help, but most want a credit card or two and a bank number. Get credit cards, but use them when the balance can be paid quickly.

Credit Cards used for Travel are Reliable

Travel costs can run into the thousands of dollars and carrying that much cash can be dangerous. Using a credit card can eliminate most of the risk of theft. Credit cards also eliminate the need to deal with local currency but it is always wise to know the exchange rate to verify the bills. Credit card charges often get the best exchange rate, offer travel miles, and can provide insurance on rental cars.

Credit Cards used for Internet Purchases are the Only Way to Go

Internet purchases require a credit or debit card. A credit card provides more safety against theft since the issuer often limits the share owed due to unauthorized charges, will challenge bills, and often has an extensive verification check. Debit cards are also nice but are limited to the cash on hand. Using a service like PayPal can add extra security.

Credit Card Interest Rates Can Depreciate Goods

If all purchases are made on a credit card and the time used to pay back the balance is large, this means extra costs are added to the item purchased and less is received for the money. This is in addition to the extra costs added to the item for using a credit card and if payments are missed the costs escalate.

Credit Card Balances Can Grow Beyond the Means to Pay Back During Down Turns

If a person uses a credit card to make ends meet, the situation will only get worse. As values go down, interest gets higher. The amount of money available to a worker to pay off their debt seldom increases unless only they get a raise, another job, more hours, or over time. This seldom happens when times are tough. It is better to look to public assistance for short term needs then to add charges onto a credit card.

Credit Cards Can Be Used For Fraud

Many people experience fraud with their credit cards. One example is unauthorized and recurring charges. Another example occurs with TV ads, where an item is ordered and then it spins off multiple payments in the small text-these can be overturned if the address, signature, birth date and other verification data are not provided. Another example occurs during foreign travel when items are billed more than once. Always check credit card charges against the original purchase receipt. Always follow up with the bank in case of fraud.

The bottom line with credit cards should always be that this is a temporary borrow of money that is paid back as soon as possible. If the balance is paid immediately, no additional interest payments or fees will be added and a efficient means of travel, payment, security, insurance, flight miles can be in hand.