Credit cards can be your friend but they can also be one of your worst enemy. Credit cards are very useful they are easy to use and provide a fast way to buy stuff. They enable Internet shopping and provide some liability protection. But credit cards can also be a bottomless sink if used the wrong way.



Credit cards are relatively a new way to transfer money between two entities. They were invented less than one hundred years ago and very fast became a huge success with practically every consumer in the USA having a few cards in his or her wallet. The reason for the tremendous success was in the superior consumer experience. Many credit cards are free fro consumers and even the ones that charge some annual fee are practically free as the fees are very small. They provide a fast and easy way to make purchases. They provide a way to track your purchases through the credit card statement. They provide some liability and warranty benefits for example if you purchase a product that is faulty and the retailer does not agree to replace or refund it you can call your credit card company to dispute the charge and more likely than not they will remove the charge from your card and penalize the retailer. In the last few years credit cards were an important enabler to the growth of Internet commerce. Having an easy to use and safe payment system was a must for Internet shopping to flourish and credit cards provided just that.

But credit cards also have another side to them an ugly side that has ruined many people lives. This side is the credit feature of the credit card. When receiving your monthly credit card statement you have two options. One is to pay the statement in full while the other is to pay a partial amount greater or equal to some minimal number. The rest of what you own is then carried over to the next month with financing charges added. The problem with credit cards is that the interest they charge for that financing is high most likely the most expensive financing that you could find. If a consumer needs to use such credit card financing once that would not be a big problem. The problem however starts with another feature of the card which is the seamless ability to make purchases up to a usually very high limit that the credit card carries. It is very hard for consumers to estimate the total accumulated charges that they put on their credit card. Many small charges do not feel like a lot of money and in fact when asked most consumers would underestimate what their monthly statement would be. Receiving a higher than expected statement means for many consumers not being able to pay the statement for lack of money thus being forced to carry debt on the credit card and bear the financing charges. This becomes a loop as the next month charges are hard to pay too but now there is also the previous months charges and the interest on the financing. This becomes a vicious circle with debt accumulating to levels that can make many consumers bankrupt.