Date: 9 Feb 2010 Comments: 0

Let’s start with the bottom line for credit card debt: If you cannot pay your credit card balance off in full each month, you shouldn’t be using it.

Seem a bit harsh? What is harsh is carrying debt at interest rates of 20% or higher. If you are carrying debt at those levels then your financial affairs and your life are simply not under control. And your finances probably won’t be brought under control until you learn the hard way.

Credit cards are wonderful things if used properly. For many they are irreplaceable. It’s hard to rent a car, get a hotel reservation, and to buy most items either on-line or in stores without one.

For young people having a credit card, making small purchases and paying off the balance in full each month will help him or her establish a good credit rating so that later in life they can borrow money to purchase a car of even a house. That is the proper way for young people to use a credit card.

Instead young people are suckered into accepting a credit card without suspecting that they are about to put themselves in substantial debt at exceptionally high interest rates. Often they don’t even have to search for those credit cards, they just appear in the mail with your name on them.

At first it is easy and fun to go through the first $5000 or so. It is as if they can suddenly have anything they might want. They start by making several payments, most often paying just the minimum amount due, and then before long they have hit the credit limit and now the card can’t be used anymore, even if it is really needed. And suddenly they are faced with payments of $200 per month or so, and that is only paying off interest charges.

For $200 per month a person could purchase a new car, but these students often have nothing at all to show for the money spent. They more than likely just blew the money in restaurants and bars. If they had to explain where the money disappeared to they probably wouldn’t know what to say.

How can I say all this with such certainty? I have two adult children who both did the same thing after college even though their parents tried to teach them to be financially responsible. Both of them had to face financial pain before they learned how to properly handle money and credit cards. And the pain would have been even worse if their father and mother hadn’t bailed them out so they could get out from under those 20% interest payments sooner.

Aside from learning the dangers of using credit cards unwisely, young people who are starting out their working lives and begininng to learn about managing money can learn a simple but valuable lesson:

Simply take your credit card and bank statements and write down what you spent money on each month. Break expenditures out into separate items like rent, utilities, food and beverages, entertainment, cash, etc. Once this system is set up it should only take about a half hour each month to update, but that half hour can be the difference between being in control of your life or not. Are you surprised to see that you blew $800 in restaurants and bars? That is the easiest way for young people to separate themselves from their hard earned money. When you force yourself to record what you have spent in black and white you put youself in a position to do something about it if necessary.

So get a handle on your credit card debt and you’ll have a firm handle on your life. You will have to face up to this some day, so the sooner it is done the better. Click this link: Student Debt Consolidation to read more about student loans and managing student debt.