Owing Money & Credit Cards

Credit cards are great! Credit cards are dangerous!

Both statements are true. Plastic purchasing power has advantages and disadvantages. It all depends on how you use them.

Credit is borrowing
What is a credit card anyway? It's really a loan. Credit-card companies and banks that issue credit cards are letting you borrow their money when you use their cards.

So when you hand the clerk your card and say, "charge it," you're going into debt. If you don't pay what you owe in full and on time that month, you'll have to pay interest on the balance you owe. And the interest you pay is probably much higher than any interest you earn on your investments. Loans and convenience come at a price.

Are you under 18?
Before credit card companies give you a card, they want to know if they can trust you. If you're under 18, they'll ask your parents to guarantee to pay what you owe if you fail to pay your debts.

Interest vs. Buying On Sale
It does you little good to shop around for sales (to save money) and then end up paying 12-20% in interest on the money you borrowed to make your purchase. Where's the savings in that?