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People should not buy things on Credit Cards

BankBazaar observes that Credit cards are one of the most lucrative financial inventions of the 21st century. In spite of people’s perceptions about their efficacy, Lewis points out that everyone needs one. To some, credit card is equated to debt, but Lewis claims that using credit cards allow product and service consumers to pay and borrow. Besides this, they are powerful in boosting consumer protection and liquidating consumers’ pockets. In spite of the benefits presented by credit cards, they may be a painful bane to consumers’ finances if used imprudently. This essay will discuss why people should refrain from buying things on credit cards.

Emergencies call for immediate responses and in such cases, credit card holders may resolve to use their cards for cash advances from ATMs to combat their insufficiency (Lewis, 2012). Although the emergency may be sorted out, the transaction results to exorbitant interest rates on the advanced money. According to Lewis, a rate of 2.5%- 3.5% per month will be induced, effective immediately, after the card holder makes the liquidating transaction. Moreover, the card holder is subject to paying a flat rate transaction fee. All this makes the card holder a huge debtor.

BankBazaar states that credit cards come with restricted cash inflows, limited to 20-50 days. Should a card holder default or fail to pay his/her bills within the designated periods, he/she will be prompted to paying an escalated late payment fee amalgamated with increased interests ranging between 2.5%-3.5% per month besides taxes on defaulted payment. This means that people buying things on credit cards should have reliable means of generating cash flows to offset payment on their credit card before due date.

Likewise, if people buying things on credit fail to promptly pay for them, the bought things are likely to cost much more than their original price. According to the Federal Reserve Bank of St. Louis, it is conceivable spending over $5. For instance, a person can use his/her credit card to purchase a 12-pack of cola from a grocery store at $5.00. If at the end of the month the credit card bill reflects that the consumer already owed $ 497 and his/her credit limit is $500, it means that the $5 purchase surpassed the credit limit. Under this scenario, the credit card accrues $27, attributed to over-the-credit-limit fee. In short, the 12-pack of cola ends up costing $32 instead of $5.

In conclusion, people should avoid buying on credit cards because it needs more than prudence to purchase only for needs instead of preferences. Using of credit card to acquire items potentiates overspending which is likely to lead to a debt spiral.