Is Credit Card Debt a Good Idea?

There are many people that have credit card debt. Although more people than not, who have credit cards pay off the outstanding balance each month, there are people who do not pay it all off every month and are in debt. Although this can be a convenient way to borrow money, it may not always be the best idea.

All debt costs money. You will be paying interest all of the time that you are in debt and therefore you need to be aware of how much it is costing you. When you get a credit card statement it will tell you how much you will need to pay in interest if you do not pay what is outstanding. You should look at this amount and think about whether you think it is worth paying. Consider what you paid for on the credit card (if you cannot remember, look at the statement). Then take a look at how much interest you will have to pay if you do not pay off the bill in full. Think about whether you think that those items that you bought are worth the extra money that you will have to pay for them if you do not pay the bill off in full. Consider whether you would have still purchased them if you had known that they would have cost you this much extra.

Credit cards can be an expensive way to borrow money via short term loans compared to other types of borrowing. Therefore if you are intending to borrow money, it is worth thinking about whether you really want to borrow it this way. Take a look at the alternatives and see if you think that they will be better for you. It can be difficult doing this, because with credit card debt, you will not know how long you will have the debt for as there is no repayment schedule. However, if you intend to just pay the minimum balance until the bill is paid off, you will be able to calculate the cost of this by adding up all of the interest payments. Looking at the APR is going to help you a bit, but if you pay the credit card off in two months, even at a higher APR it is likely to cost less in monetary terms, then a personal loan, at a lower APR that you pay back over a few years. You will therefore have to sit down and do some calculations and think about how quickly you will be repaying.

Credit cards can be a cheaper alternative to overdrafts and payday loans though, which means that they could help you to save money when borrowing. It therefore depends on your circumstances and what borrowing options you have available to you as to whether a credit card would be a good borrowing option for you.

Borrowing is not always a good idea though; it depends on why you are borrowing money. It is worth thinking about the reason why you are borrowing money and whether you really can justify it. This will very much depending on your own circumstances and your attitude towards risk. You may feel that you really need the item that you are buying, that it will make a huge difference to your life and that you can justify the extra money that it will cost you. You may have a plan in place for how you repay the money that you borrow and feel happy and confident with your decision. However, you may be buying an item that will make little difference to your lifestyle, you may not have thought about how you will pay for the loan and you may have not given much thought to your decision. You should be able to see the difference between these two situations and that even if the amount of borrowing is the same, that one is better because there has been a lot more thought about it. With everyone being different in their opinions on what is essential, what will make a big difference to their lives, how much they fear debt and how good they are at managing loan repayments, it means that whether the debt is a good idea will very much depend on the person and their specific circumstances.