Credit and store cards: the dangers

Over the years Britain has become increasingly reliant upon credit, and many people have started to rely on plastic in the form of credit and store cards. This type of credit can be very useful when used properly and when willpower is exercised, but spending on the plastic can very quickly get out of hand, which can – and has – led to people finding themselves in huge levels of debt very quickly. There are people that are able to spend widely on credit and store cards, and then repay their spending at the end of each month, which means that they get to enjoy the ease, convenience, and flexibility of credit cards without the added charges and high levels of interest. However, there are also consumers that have little or no control over their spending, and these are the people that can find themselves adversely affected by spending on the plastic.

Many people manage to clock up thousands of pounds worth of debt on credit and store cards, and then can only afford to make a minimum repayment on their cards. This means that you could be paying off your credit and store cards for many years – even decades. In fact, some people clear their mortgage before they manage to clear their credit cards, which reflects just how costly these cards can be in the wrong hands.

One of the main dangers of credit and store cards is that they can become addictive to some people. Once a person with little willpower of financial judgement has discovered the joys of credit card spending, it is highly likely that they will keep applying for credit cards and store cards until they are unable to take out any more credit. In many cases, by the time this happens, the consumer has already clocked up so much debt that it is unlikely they will be able to pay it off for years, or in some cases at all.

The high rates of interest that are charged on most credit and store cards are another danger. Of course, if you repay your balance in full each month you don’t have to worry about this. However, if you make small monthly repayments then you will find that your balance just never seems to go down because of the interest that is being accrued on the balance. This can make it increasingly difficult to repay the debt. The ability to take out multiple cards, some with high credit limits, is another danger, as it can quickly lead to your debt levels going through the roof, and for many this is the start of a downward spiral.

Another danger to look out for is the temptation to impulse buy, which is what many people do with credit and store cards. It is all too easy to whip out the plastic and purchase something that you don’t really need and you would not have otherwise purchased had it not been for the credit or store card. In fact, staff in many retailers with store cards rely on the consumer’s tendency to impulse buy, as they have a better chance of getting them to sign up for a store card that way. Offering large discounts at the point of sale is an effective way for sales staff to do this.

These days there are many balance transfer credit cards available, where consumers can transfer the balances from their high interest credit cards onto a credit card that offers an interest free period. However, you should then close down the credit card accounts from which you transferred the balances otherwise there is every chance that you will spend on them again, and be left to pay off your old cards and your new balance transfer card. The same goes for if you consolidate your credit card debts using a consolidation loan.

Anyone that feels that they have little willpower when it comes to spending should be very careful with credit and store cards. In fact, it is best to stick to having just one credit card, preferably with a low limit, which can be used for emergencies, as this will reduce the chances of getting into unmanageable levels of debt. It is best to avoid store cards altogether, as they cannot be used for emergencies because they can only be used as selected retailers.

However, those that are able to exercise willpower could enjoy many benefits from credit cards and store cards, including the chance to earn rewards and enjoy impressive discounts. It is important to clear the balance on the account at the end of each month in order to fully benefit, as otherwise the interest that you pay on the balance could counteract any benefits that the card offers.