When credit cards were first introduced they were not seen in anything other than a positive light. They were convenient of course and did away with the need to carry too much cash. These days all the advantages of convenience remain and those who ”trade” online could not really operate without one. However they are also a cause for concern because of the level of debt that many Americans have built up for themselves. It is not a card’s fault as such because companies have not forced users to spend to their limits but it has been so tempting and remains so.
The average American debt on credit cards is over $6,000 but if the group who pay off their balances routinely at the end of the month are taken out, the debt leaps to over $,000. That is the real downside of cards and if users were to accept one word of advice it would be to get rid of this expensive debt by taking out a cheaper personal loan and pay balances off.
Credit cards do have a particularly positive side if used properly. You will need to do your research to get the best deals but if you do you can actually earn money or more accurately make considerable savings.
Those who have avoided problems with cards often have the opportunity to take on new cards and get rewards for signing up. Those rewards can be used in the future in a number of ways but if you are required to spend a minimum amount to get the rewards you need to think whether you will do that without spending on things you don’t need. Of course even if you will spend the required amount the benefit of rewards is negated by the interest you will be charged in spending and not paying off your statement amounts in full. Whether you keep the card beyond the short term should depend on the fees involved. Sometimes there are incentives for doing so such a free night in a hotel which is effectively worth more than the re-signing fee being requested.
It is always worth remembering that there are rewards available without actually owning a credit card of course.
Credit Score Impact
It is important to consider the impact of cancelling a credit card on your credit score. If you do so your debt-credit ration changes for the worse because your potential credit is reduced. It is better to maintain a card but perhaps switch to one offered by the same company but not requiring an annual fee if you see no advantage in the current card. The credit score also considers the age of existing accounts with long term accounts that have been run well a real positive.
At times you may be able to negotiate waiving the fee; it depends how much the card company values your business.
If you want to have multiple credit cards it will give you availability to quite a lot of credit; the danger is using too much of it. If you are sensible your credit score will be enhanced as long as your credit-debt ration remains good. It makes sense to think about reward programs to see whether there is real value. If the choice is 2% cash back or rewards whose value is less take the cash back as an example.
It is too easy to get into trouble with cards and the evidence is in the statistics published on a regular basis. There is an argument that the lessons of the recession have not been learnt. There appears to be a fairly complacent attitude towards debt that the recession should have banished. Even though consumer confidence has returned and the signs in the economy are generally positive it is difficult to justify credit card debt. It is expensive and frankly a waste. Where there are chances to benefit from using a card then fine. It takes some research to really take full advantage but it is time well spent. Sadly it appears that many Americans have become trapped by their cards rather than being able to take advantage of promotions and benefits as they come along.