Categorized | Family Budget Tips

When Does A Credit Card Become A Liability Instead Of A Lifeline?

Credit cards are the ultimate double edged sword that can be both a lifeline and a major liability. From a family budgeting perspective, you’re dealing with dynamite. You really need to have a clear understanding of what role credit cards will play in your family finances. For some people, they’ll merely be devices through which to facilitate transactions without needing to have cash. Presuming the balance is payed off at the end of the month, this is a perfectly legitimate way to use a credit card. It’s acting as a lifeline by facilitating everyday transactions.

However, for far too many people, credit cards become a major liability. Families will sometimes have a slew of unexpected expenses (or sometimes even regular expenses) that arise. How are these things paid for? With credit cards. But then, at the end of the month, a balance reminds. As a result, the credit card company starts to charge interest. This can quickly add up, to the point where — if you’re not careful — you could end up with a significant long-term liability that will simply linger for years and years.

The secret is to be extremely disciplined with how you and your family choose to use credit cards. It’s okay for them to be there as a genuine lifeline and as a mechanism through which to facilitate shopping transactions. Where it starts to become a real problem is when you notice that a lot of un-budgeted discretionary spending is taking place. This is a sure-fire way to run up a massive amount of debt in a relatively short amount of time. At this point, the credit card ceases to be a lifeline and truly becomes a liability.

Here’s the bottom line: credit cards do not provide you and your family with “free” money — it all comes with some very hefty strings attached. Between the high interest and the potential for additional fees, the overall approach that many experts recommend is that you attempt to minimize your usage of credit cards. Don’t ever let yourself be fall into the trap of believing that it’s easy to pay off credit card debt…. it’s not! So be smart, and make good decisions.

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