Americans And Credit Cards Essay

1127 words - 5 pages

Should Americans use credit cards?
8/29/10
University Composition and Communication II
Lowrie Fawley
Axia College of University of Phoenix
Why would a person want to induce stress, have financial burdens, and pay more out-of-pocket expense just for using a credit card? There is no need to strap your self into the continuous game that credit card companies like to play. This is why it is best to not use credit cards for any reason what so ever.

According to a study published in the journal Social Science and Medicine (February 2000), found that people with a higher level of debt were more likely to have higher stress levels than that of someone who had lower levels of debt. What ...view middle of the document...

Why is this? Because of the interest rates placed on credit cards. If your total spent on the credit card were 1200 dollars, with an average fixed interest rate of 13.74% (Bankrate.com Aug. 26, 2010) your total payment on these items would be $1,368.80. However, if your rate was flexible, at 14.3%, your total is $1,371.60. Thus, adding even more financial debt to your life and causing a deeper hole to be dug. I do not understand why anyone would want to worry about getting out of a deep hole in order to live debt free. Additionally, there is an alternative to using credit cards. I call it, planning to spend. This works by using your net pay and determining how much you need to make it until your next check. I figure out bills to be paid, gas, food, as well as a little extra for emergencies. The money left over is what I can spend, so if I wanted to buy those pair of shoes and I could afford it, then I would do it. Be wise when spending and it will ease the financial burdens that credit cards can do.

There is a cycle that people trap themselves into when using credit cards. This vicious cycle is when you only make the minimum payment each month. This usually is done by taking a small percentage of your balance and paying only that each month. For example, if the monthly payment made is $150, $50 of that is interest. In many cases, it can take you almost 20 years to pay off the debt. In addition, you will be paying well over a quarter of your balance in interest alone. So, if you have $6000 on the card, then your interest paid, by making only the monthly payments, is over $2000. That is definitely not a smart way to be financially responsible. Nor is it saving you money.

Although credit cards help build credit, there are drawbacks to using them. For those people who have no credit, it is nearly impossible to get a loan or attempt to make a big purchase. According to the Fair Isaac Corp., creator of the popular FICO credit scoring model, about 20 to 25 million people in the United States...

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