The dangers of credit
Credit cards
Credit cards work in a similar way to debit cards as far as usage goes, but the very important point to remember about credit cards is that you are spending the bank's money and not your own. This is why it is very important to fully understand the dangers of credit as described below.
The dangers of credit cards
Fortunately, you cannot get a credit card until you are 18, but unfortunately, simply being 18 doesn’t mean you are financially literate enough, not to fall for the credit card debt trap, and experience the damages of credit first hand.
The simple fact is, banks are in the business of making money (profits), and credit cards provide huge sums of money for banks, by consumers (you and I), who get themselves into debt using credit cards.
It is easy to get a credit card as soon as you are 18. It is also easy to find things, and “stuff” to buy, using your new “magic card”, which will allow you to spend the bank's money, at the speed of lightning.
New phone, ka-ching, new laptop, ka-ching, new clothes, ka-ching, coffees, cinema, restaurant, a round of drinks for everyone, and another! You get the idea. One of the dangers of credit is that it can appear free.
It is incredibly easy to get carried away with your new-found credit card friend, it quite literally will never say no, until you have reached your credit limit that is, which could easily be £5,000!
Once you have had your spending spree and the fun subsides, on the 1st day of the following month, your credit card statement will come through, showing you both how much you have spent of the bank's money, and also how much extra they want back in return. Don’t think for a second that banks charge the same interest for you to borrow their money, as they are prepared to pay you for your savings, oh no, get ready for another one of the dangers of credit.
You may only earn 0.1% or 1% on your savings, but they will charge you much, much, more, probably somewhere in the region of 15% - 25%, and possibly even as high as 30% or 40% in some cases.
Many people have taken years and years to get out of the debt trap created by credit cards, and some people, unfortunately never do get out of debt. These people were not financially literate and did not understand how the system works. You, on the other hand, will be financially literate after reading this website and will understand the dangers of credit.
So in summary, unless you know how to use a credit card to your own advantage, i.e. use the bank's money for free, and never ever pay them a penny in interest, then I would strongly suggest, you stay away from credit cards, and throw the numerous offers you will get from the banks, straight in the bin!
THE DANGERS OF CREDIT FACT: New students are deliberately targeted by banks, keen to offer them credit cards for their increased spending habits away from home.
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