Sunday, 14 April 2013

Credit cards - Are they for everyone?

A friend of mine confessed to me recently that he used to have a credit card but had to get rid of it.   He saw it as "free money" and had every intention to pay it off at the end of each month but ended up only paying part of his balance and very quickly ended up owing a large amount.  He made the decision to get rid of his card, worked at getting rid of his debt (this took a long time) and now only buys things if he has the money to pay for it.

So credit cards may not be for everyone.  Here are some thoughts on the advantages and disadvantages of having them.

  • Advantages: Convenience, Access to Funds, Safe and Reliable / Fraud Protection, Insurance for Purchase, Rewards

  • Disadvantages: Convenience, High Interest Rates, Potential Fraud, Higher Prices for all Consumers, Decreased Self-Regulation, Hidden fees

The disadvantage that caught my friend was "decreased self-regulation" or when you don't regulate your spending as much as you should, do more impulse buying, less comparison shopping etc.

Here are a couple of links you may find useful for teaching students, children (and adults) about credit cards:

  • Get it on Credit This video is very entertaining while at the same time you learn about credit cards, payment terms, compound interest and credit scores.
  • Funny Money - Cost of Borrowing  - This is a great lesson created by the Investor Education Fund, a Canadian non-profit organization, for learning about reading a credit card statement and the cost of using credit cards.  See the video they also created in the link above. 

James Whelan,

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