Credit Card Debt

Credit cards carry a lot more risk than they do benefit.  They offer convenience, are easy to dispute charges, and the ability to earn cash back points and benefits (small benefit), but if not handled properly they can quickly destroy your financial future due to extremely high compounded interest rates (high risk).  Please remember that you are playing with fire when you use credit cards.

If you are very careful and precise with your spending you can take advantage of the convenience and cash back bonuses by using credit cards (if you use the right ones).  Link to reward cards here. Credit cards only work for your financial future if you pay your bill in full each month (you pay no interest) and you get cash back bonuses (by selecting a card that offers a cash back bonus with no annual fee).

The problem with credit cards is that you don’t have a sense of limitation when making purchases (as you would with a limited about of cash) which can result in you often spending more money than you should.  This goes against the key personal financial principle of living beneath your means.  Related: Lifestyle inflation can be a financial killer!

When in doubt use cash or another method (debit card) that limits the amount you can spend.  Your financial future is too important to overspend.  This is truly death by 1,000 cuts.  $20 too much here, $10 too much there will add up to hundreds and often thousands of dollars in a very short period of time.  Before you know it you are behind on payments which puts you down of very dangerous financial path that goes against your

If you are going to use credit cards just have a couple of the major credit cards and avoid having too many cards, especially specific store cards.  They are not necessary.

Welcome To SmartMoneyToolBox

Hi, my name is John. I am a CPA who has worked in both public accounting and private industry since my career began in 1990. Building financial security is a marathon - not a sprint. It’s not a get rich quick formula. If you provide the effort, SmartMoneyToolbox will supply the tools!

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