Does it make sense to use credit cards?

With the inherent risks of credit-based disasters like foreclosure or bankruptcy, many people are beginning to doubt whether or not they should use credit cards. Credit cards do, after all, have very high rates of interest and there are dire consequences should one fail to pay them off properly. So why use them at all?

Credit cards allow ordinary people to increase their effective purchasing power. By letting you buy now and pay later, it enables you to avoid having to scrimp and save and wait for money to arrive and instead make purchases when you want. This sort of convenience allows people to make big purchases they would otherwise be unable to make, which is the reason that credit cards quickly became so omnipresent. They also permit for easy transactions where cash would be problematic, such as making purchases over the internet or phone. This means that many merchants will accept credit cards as readily as they would cash.

The problem comes when people are irresponsible with their credit. Because credit cards are so easy to use, human nature leads people to rack up huge purchases without paying attention to how much they owe. Credit cards lend money purely on the faith that you, as a good person, will pay the money back, so the bank which issues a credit card attaches a painfully high rate of interest. This is to encourage you to pay them back their money as quickly as possible and will net them a nice profit should you fail to do so. These high rates also ensure that the bank loses less money when an irresponsible credit card user goes into default.

Credit cards are very useful for making purchases, but only if you use them responsibly. Credit cards can be worthwhile ways to borrow money for large purchases such as electronics or home improvements provided you budget them properly and pay them off promptly. Credit cards are dangerous if you're irresponsible, but with a little care and concern they can really help you out.

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