INTRODUCTION

 

Credit cards are convenient, aren’t they?  They enable us to walk the streets without cash, yet able to make an impulsive purchase or handle an emergency situation whenever the desire or need arises.

 

In addition, the ability to give a string of numbers to an Internet web site or to a customer service rep over a telephone means no long waits for mails to deliver your checks or money orders in payment for essential or desired items.

 

Like anything convenient, though, credit cards have a flip side, yes even a dark side.

 

When you walk into a store, find an item you desire, and reach into your wallet or purse for cash, you instantly know if you can afford the item.

 

But with a credit card … ah, the power of it all.  Whip out the little piece of plastic, hand it over for a minute or so, and walk out the door with your purchase in hand.

 

Wonderful feeling, isn’t it? But what just happened?

 

In essence, you’ve lowered your spending power, but unlike a cash transaction, that fact will quickly, although only temporarily, be forgotten.  Often it will be forgotten until it’s too late.

 

Now the next time you go shopping, you look in your wallet or purse, count your cash, and say to yourself that you still have that all-important discretionary income.  In other words, the cash that’s left over after you account for the budgeted expenses you need to pay to survive (for example food, clothing, and shelter).

 

Is that true?  Do you still have the same amount of purchasing power after you bought that pair of shoes or that nice lunch in the expensive restaurant, or the new IPOD?

 

No, of course not.  If you budget income of $2000 for the month and expenses including savings of $1800, what does that purchase of that $300 IPOD do to your budget?

 

Right.  It blows it.  It puts you in debt.  But the bigger problem is, most consumers don’t realize it because they’ve whipped out the card, spent $300 for the IPOD, $75 for lunch, $150 for shoes, and still have extra money in their pocket.

 

Until the bills come.  So then what happens?

 

Many consumers look at the $525 credit card bill and make the minimum payment, or even a little more, maybe $50 or $100, and they feel good!  And next month they do the same routine.

 

Is that what’s happening to you, month after month?  You spend more than you have.  You purchase with credit cards and forget until the bills come.  And you slowly but surely see your debt rise, month after predictable month, until your first card is maxed out.