Your Credit Card: Pretend Money
Contributed by Boo Roberts
What is a Credit Card?
A credit card is a piece of plastic that allows you to purchase items using credit. Another way of looking at it is this: you use a credit card and borrow another person's money to make a purchase. When the end of the month comes, you get your credit card statement and that shows how much you owe the credit card company. The smart way to handle your credit card is to pay off the balance in full at the end of each month. The dumb way to handle your credit card is to carry a balance and pay interest on the money you borrowed, until it is paid off.
What is the allure of a Credit Card?
The allure of having a credit card is: it doesn't seem like you are spending money at all. It is so easy to whip out your plastic card when you see something you like and just sign on the dotted line. See a pair of gorgeous shoes that you absolutely must have? I'll just use my credit card. See a beautiful outfit to go with those shoes? Why, wrap it up, I have a credit card. I don't have the cash in hand for dinner out? Ach, throw it on the credit card.
It is very simple to forget about what you buy until your credit card statement comes due. Then, unless you have been careful and only bought what you had the money for, your bill can be quite a surprise.
