Thinking about personal finances, it’s impossible not to consider the impact of that little piece of plastic that you carry around in your purse. We are, of course, talking about credit cards. You might not have a credit card, and if that’s the case, you’re in a better position than most. However, you will also be missing out on some of the great credit cards. So, let’s explore this little piece of plastic more and figure out how it could hurt you, help you or hinder you.

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The Good

There are a few good points about credit cards. The first is that you can use your credit card to improve your credit score. Your credit score impacts various aspects of your life, so this is well worth doing. For this to work, you need to borrow what you can afford to buy and pay back on time but not early. By doing this, you will improve your credit score.

Credit cards also allow you to buy what you otherwise wouldn’t be able to afford and pay it off in installments. This could be anything from a sofa to a laptop or really any other expensive purchase you can think of.

Finally, with credit cards, you can get great benefits and incentives depending on which one you use. For instance, you might get air miles, money back at the superstore or money off gas. As such, it’s best to shop around and look for the right card for you.

The Bad

Unfortunately, your credit card can also fuel your FOMO or fear of missing out. This means that you can end up spending a lot more than you can afford simply because you have that piece of plastic. It’s easy to forget that the money you’re using isn’t actually yours and every time you use a credit card, it’s essentially a mini loan.

As well as this credit card usage can become an addiction. You may begin to buy in the same way that other people drink and smoke, ultimately forming a very expensive bad habit.

The Ugly

Ultimately, credit cards can lead you into all sorts of issues including unmanageable debt. Indeed, much of the debt that people face today isn’t from loan sharks but instead are carried around on credit cards. You then need to learn how to pay off credit card debt, and it can be a long, tough road. Debt consolidation is the best option, forming one easy payment that gets paid off each month.

If you are unable to pay off the debt, then it can lead to bankruptcy and cause you to lose your assets. It will also shred your credit score which will make it difficult to buy a house or take out any loan that you might need in the future.

As such, while credit cards can bring benefits, it’s important to keep a check on their usage. Ultimately you shouldn’t be buying beyond what you can afford in your annual budget.

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