The Temptation to Use Credit

It’s no secret that the economy at the moment isn’t in the best of conditions. People are finding their bank accounts dwindling or, in the worst cases, totally drained of funds. Is it any wonder that when you slide your card at the store and hear those words, “Is that debit or credit?”, you’re tempted to answer with the latter?

After all, if you use debit, you’re reducing your cash on hand; if you use credit, you’re putting the expense off until the future, perhaps a point in the future when the economy will have improved and you’ll be in better shape? It almost seems to make sense.

However, it’s not quite that easy.

When the temptation to go with credit over debit comes up, it can almost seem too good to be true. If it *does* seem like that good of an idea to you, it’s almost certainly because you’re temporarily overlooking the critical factor of interest. When you spend money on a debit card, granted, that money is gone, and you’re not going to see it again. That can be a scary thought in a climate when people are losing their livelihoods. However, if you resort to using credit instead, you’re going to have to pay back more than you spend; in some cases, far more.

So, the hundred dollars on groceries that you “save” today by going with a credit card can easily turn into two or three hundred in just a short amount of time, especially if it’s going to be awhile before you pay off your full balance. And let’s face it: it will be awhile. If you had the money to spend on paying off your full balance soon, you’d just use debit, right? If you’ve got to use a credit card for a purchase, you have to assume you’ll be paying it back in increments and accuring interest all the while.

Some people will cite certain advantages that credit cards supposedly hold over debit cards, such as the fact that they allow you to establish a good credit rating, and occasionally offer other incentives such as cash back on purchases or frequent flyer miles. You have to ask yourself, however, whether or not these advantages really outweigh the risks that you’re taking upon your shoulders whenever you choose to use a credit card in a risky economy.

In most cases, the cash back doesn’t end up amounting to much, usually somewhere around 1% on purchases. It can almost guarantee that your interest rate is higher than that, and thus, pretty much negating any benefit you might have gained. Besides, if it really means that much to you, there are many debit and bank cards that now offer similar incentive programs. Ask your bank if you can sign up for one of them.

We understand that the temptation to resort to credit can be huge. However, think about the reason you’re considering it – you’re looking to the future, with hope that the economy will improve. Ask yourself – isn’t it better to weather the storm now, so that when that improved economy does come around again, you aren’t still stuck in the rut of paying off long overdue bills? Think ahead, and plan for the long term, especially when it comes to your credit.

Related Articles

• Improper Credit Card Usage and How It Affects You
At what point do credit cards go from being an asset to a liability? Everyone knows about the advantages that a credit card can offer.