Have Credit Cards Let Us Down?

Author bio: This is a guest post from Steve who writes about personal finance from his unique perspective at Money Infant. Once you are done here head over there and say hi. Tell him Tight Fisted Miser sent you!

It’s a silly question really. Credit cards aren’t like people, they can’t let us down. They are simply pieces of plastic used to access a line of credit granted to us froma bank or other lending instituition. Credit cards aren’t good or evil, they are simply another tool in a large arsenal of financial tools. If anything it is us who have let ourselves down through our poor understanding and use of credit cards.

What is a Credit Card Really?
A credit card is a card issued by a financial institution that gives the holder the ability to charge goods and services (borrow money) usually at the point of sale. Credit cards are meant to be used for short term financing and as such typically charge high interest rates. Borrowing limits are set by the financial institution issuing the card and are determined based on a set of criteria including FICO scores, current outstanding credit, outstanding credit line used and other factors.

Why We Feel Let Down
Many of us are carrying large amounts of credit card debt and feel as if we can’t escape from the credit card treadmill that we find ourselves on. I know exactly how this feels because I was once on the same treadmill. You feel loss of control, overwhelming frustration and as if the credit card company let you down. The problem is we didn’t understand the proper use of credit cards – short term financing. The credit card didn’t let you down, you let yourself down by using this tool incorrectly.

Proper Credit Card Use
To enjoy the benefits of credit card use (ease of payment, cash back and points programs, increased credit score and financing options, lowered interest rates) we need to learn how to use them properly. It really isn’t difficult if you can simply keep in mind that credit cards are meant for purchases that will be financed for 30 days or less. Typically it is after 1 month that interest begins to accrue, so if you pay your card off before this you avoid the hefty interest charges and using your card isn’t really any different from cash.

No matter how betrayed by your credit cards you may feel the truth is they are there to help you if you can understand them and use them the way they are meant to be used