Credit cards provide an illusion: magic money. The small, plastic card can be a gateway to treasures untold such as a new television, a new wardrobe or those shoes you have been lusting over but never have the cash to purchase. However, financial experts agree with this dire warning: do not purchase anything with a credit card that you will not be able to pay off at the end of the month.

The reason for this is due to interest rates and finance charges. It is easy for the most credit card savvy of spenders to get lost in the tangle of APR (annual percentage rate) and ADB (average daily balance), and many credit card owners do not fully comprehend that the payments that will be made will exceed the purchases that were made, particularly if the balance is not paid in full each month.

If you are capable of paying off the balance monthly, then a credit card may be an excellent way to build credit. As we know, good credit becomes increasingly necessary when it comes time to buy a car, house or other important purchases. However, it is far too easy for most to simply“charge it” and build up credit card debt that is difficult to pay off. Monthly payments quickly escalate in value and many consumers find themselves in a situation where they are unable to even make minimum payments each month, let alone pay off the balance. This problem, added with the possibility that each person can have several credit cards, can lead to financial demise and ruined credit.
Should a credit card be necessary, and in case of emergency they are handy to have around, then do your homework before selecting a card. Find a card with a low interest rate and no annual fee. Do not sign up for multiple cards and try to reserve using the card for emergencies only or for big purchases (such as appliances) that you have money in the bank for and will be able to pay off at the end of the billing cycle.