Credit cards are wonderful financial tools. They provide comfort and ease of use when purchasing goods. They provide a peace of mind and liability protection. But credit cards can also be a dangerous vicious tool when not used correctly.
Credit card debt is a big problem in the United States. There is something magical about the ability to go to a store find a product that you would like to purchase and then go to the cashier and be able to walk away from the store with that product by online swiping and plastic card and signing a small piece of paper. Using credit cards can be too easy which can be risky as consumers lose touch with money and with how much they really spend.
The problem with credit card being too easy is that in contradiction to cash which as a tangible feel a credit cards does not. An example would illustrate it. Lets say that you are at a store and would like to buy a product that costs four hundred dollars. If you were to pay in cash you would see in a very visible way the about of money you paid. You will have to count twenty dollar bills and would see how they pile up. This will in turn give you a better understanding and a better feel of how expensive that product is. There are many more bills to count and there are many more notes on the table when buying a four hundred product as opposed to a twenty dollar product.
With credit card this ability to visualize the cost of a product is lost. Regardless of the cost of the product the process is always the same and always takes the same time and requires the same tangible elements. The process is simple the credit card is swiped on a special payment terminal. The terminal then prints a slip on which you have to sign. Once the slip is signed the deal is closed and the charge is put on your card. The only difference between buying a four hundred dollar product and a twenty dollar product is the number printed on the slip which has no tangible visualization.
Using cash allows people to get a feeling of how fast they fun out of money. If you have five hundred dollars in your pocket and you buy a four hundred pocket it is very visual that you are left with not much. For most of us being able to estimate the sum of many small charges on our credit card is very hard. Ask most consumers when they get their credit card monthly statement if they can guess what would the total be and most of them would guess wrong usually assuming it is much less than what it really is.
The first step to solving this problem is awareness. Consumers that are aware of that problem can do many things. They can combine using credit cards when they are really needed and cash in all other times. They can also make sure to login to their credit card online account to see live updated list of charges on their card and the total thus constantly being aware of how many charges they are accumulating on the card.
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