Credit Card Truths

A Credit Article Contributed by Miranda Marquit

Having a Credit Card is Fun

No one can deny the thrill of using a credit card. The spending, the seemingly limitless buying power. Perhaps the most fun to be had with a credit card is shopping for clothing. After all, there are few things in life as perfect as finding the perfect outfit and knowing you can pay for it with just the swipe of a piece of plastic -- the credit card. Shoes, coats, dresses, jeans. All of it, perfectly coordinated and paid for by proudly wielding the credit card.

The temptation is clear, and it is important not to get carried away. While using a credit card can be fun and convenient, it is important to remember that a credit card is, in fact, a loan. A loan with the possibility of high interest. So it is important to use the credit card responsibly, with very few frivolous splurges. In most cases, those great shoes or that perfect outfit is a frivolous splurge.

It's Easy to Get a Credit Card

The ease of acquiring a credit card is well-documented. Most of the time all you need to do is fill out a simple form. If you make more than a minimal amount per year, and for students sometimes it's less, a credit card can be yours.

Much of the time a credit card offer comes with a special low interest rate. And the ability to get a cash advance! Or a balance transfer! It is so convenient. All of your banking needs taken care of with one little plastic credit card.

Unfortunately, the ease of obtaining the credit card can lead to irresponsibility and more cost than originally anticipated. That introductory rate goes up. Even if the new rate is low, it's important to note that most of the fine print reserves the right to change your rate at any time.

Cash advance rates are usually much higher than a regular rate. Plus, if you miss just one payment, or are late just once, the credit card company may increase your regular interest rate to the cash advance rate -- some companies charge 20-22 percent for this rate!

Responsible Use of a Credit Card is a Good Thing

So you should never get a credit card, right? Wrong! A credit card can be very helpful if used responsibly. Nothing can beat having that credit card when you're stuck in the middle of nowhere and need a tow. Or when your best friend is eloping to Vegas and wants you there. Having a credit card available for emergency purposes is a good idea.

Also, in order to get any sort of a loan for the really important things -- a house, a car -- you need good credit. Especially for a home loan. Having a credit card that you make regular, on-time payments on shows that you have experience using credit wisely.

That doesn't mean you should always carry a high balance. But there's nothing wrong with using your credit card to buy that fabulous dress, and then paying it off over the course of two or three months.

The key is to remember that you will have to pay off that balance sometime, and the sooner you do it, the less you will pay in interest charges to the credit card company.