One of the easiest things to get into, but the hardest to get out of, is credit card debt.
Yet, we fall for it time after time, and every year as young people reach the age here they get their hands on these pieces of plastic more and more are getting into debt.
Now don't get me wrong.
I am not saying that credit card companies are the sole cause of bad debt, clearly that is not the case.
But, the fact is that for years getting hold of credit cards has been made so very easy.
Young people leave school or college, get a job or go to university, and the temptation is there to take on credit cards.
This does not mean that every young person is financially irresponsible of course, far from it.
I know some young people who have one credit card, and every month the amount outstanding gets paid off in full.
And for them it works very well, as a card is safer to carry than cash, and it better enables them to manage their money over the month.
But, too many of us, and not just the young, rely very heavily on our credit cards.
And that is where the danger lies.
The mentality of the credit card providers is that because of the huge numbers of those defaulting on their payments, they have had to try to recoup their losses.
And to do that, they increase their interest rates.
So, those who are paying their cards who have remaining balances pay more.
Sadly though, there are some people who find they struggle more and more to pay off their cards as the interest rates keep going up.
It becomes a vicious circle.
How can credit card companies possibly justify interest rates of up to 20% per annum, sometimes even more, when the official lending rate is around 1%? And to make matters worse, they used to increase your spending limit without even being asked, so you could spend even more with the card.
There is no question, credit cards can run away with you, and before you know where you are you are deep in debt.
You have no control over the interest you are being charged, and the only way to put an end to the spiral of debt is to pay the card off, which is easier said than done.
It can get so bad that some people actually withdraw cash on one card (incurring punitive charges) so that they can then use that money to pay a payment on another of their cards.
What a crazy situation! The level of total debt in the US is in the trillions of dollars.
Personal debts average in their thousands of dollars, and it is getting worse with the passing of time.
Living now and paying later can take a toll on your finances.
If you must have one here are a few suggestions on dealing with credit cards.
1.
If you miss payments you will get additional charges you could well do without.
The penalties for late payment can be anything from $10 to $40.
Set up a direct debit so that due payments get paid on time.
2.
Ideally, you should always pay off your card each month, never leaving an outstanding balance, even if it is only a small balance.
3.
Credit card companies love loyal customers.
they can charge what they like, and loyal customers will carry on paying.
Forget loyalty.
It is a one way street, and guess what - you are the loser! If you have a balance you can not pay off right now then you need to look for a provider offering 0% interest for a length of time.
That way you may be able to eat into the debt, even if you don't pay it off fully.
When it is time to start paying interest again try looking for another card company with low or 0% interest.
4.
You can almost guarantee that if you have ten credit cards you will use them all.
Stick with just one or two.
5.
Credit card companies try very hard to get you to take out payment protection insurance.
Be warned, the costs for this type of cover are usually very high.
They will try to sell you the insurance by offering the first month or so 'free' but be very careful to check how much it will end up costing.
The credit card companies are primarily interested in themselves, and apart from the fact they are more assured of getting paid if you do face certain financial difficulties, they also get paid by the insurance companies from signing you up.
6.
If you get into difficulties you need to do something about it.
The problem will not just go away.
Talk to your card provider to try to agree a payment plan which is reasonable.
If that fails seek advice from a professional.
And quit using your card, preferably by cutting it in half.
Yet, we fall for it time after time, and every year as young people reach the age here they get their hands on these pieces of plastic more and more are getting into debt.
Now don't get me wrong.
I am not saying that credit card companies are the sole cause of bad debt, clearly that is not the case.
But, the fact is that for years getting hold of credit cards has been made so very easy.
Young people leave school or college, get a job or go to university, and the temptation is there to take on credit cards.
This does not mean that every young person is financially irresponsible of course, far from it.
I know some young people who have one credit card, and every month the amount outstanding gets paid off in full.
And for them it works very well, as a card is safer to carry than cash, and it better enables them to manage their money over the month.
But, too many of us, and not just the young, rely very heavily on our credit cards.
And that is where the danger lies.
The mentality of the credit card providers is that because of the huge numbers of those defaulting on their payments, they have had to try to recoup their losses.
And to do that, they increase their interest rates.
So, those who are paying their cards who have remaining balances pay more.
Sadly though, there are some people who find they struggle more and more to pay off their cards as the interest rates keep going up.
It becomes a vicious circle.
How can credit card companies possibly justify interest rates of up to 20% per annum, sometimes even more, when the official lending rate is around 1%? And to make matters worse, they used to increase your spending limit without even being asked, so you could spend even more with the card.
There is no question, credit cards can run away with you, and before you know where you are you are deep in debt.
You have no control over the interest you are being charged, and the only way to put an end to the spiral of debt is to pay the card off, which is easier said than done.
It can get so bad that some people actually withdraw cash on one card (incurring punitive charges) so that they can then use that money to pay a payment on another of their cards.
What a crazy situation! The level of total debt in the US is in the trillions of dollars.
Personal debts average in their thousands of dollars, and it is getting worse with the passing of time.
Living now and paying later can take a toll on your finances.
If you must have one here are a few suggestions on dealing with credit cards.
1.
If you miss payments you will get additional charges you could well do without.
The penalties for late payment can be anything from $10 to $40.
Set up a direct debit so that due payments get paid on time.
2.
Ideally, you should always pay off your card each month, never leaving an outstanding balance, even if it is only a small balance.
3.
Credit card companies love loyal customers.
they can charge what they like, and loyal customers will carry on paying.
Forget loyalty.
It is a one way street, and guess what - you are the loser! If you have a balance you can not pay off right now then you need to look for a provider offering 0% interest for a length of time.
That way you may be able to eat into the debt, even if you don't pay it off fully.
When it is time to start paying interest again try looking for another card company with low or 0% interest.
4.
You can almost guarantee that if you have ten credit cards you will use them all.
Stick with just one or two.
5.
Credit card companies try very hard to get you to take out payment protection insurance.
Be warned, the costs for this type of cover are usually very high.
They will try to sell you the insurance by offering the first month or so 'free' but be very careful to check how much it will end up costing.
The credit card companies are primarily interested in themselves, and apart from the fact they are more assured of getting paid if you do face certain financial difficulties, they also get paid by the insurance companies from signing you up.
6.
If you get into difficulties you need to do something about it.
The problem will not just go away.
Talk to your card provider to try to agree a payment plan which is reasonable.
If that fails seek advice from a professional.
And quit using your card, preferably by cutting it in half.
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