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Credit cards are good -- when used properly

Credit cards have so many redeeming qualities that it would be illogical to demonize them all together. Not only are credit cards ultra-convenient for transactions both in person or over the Internet, using a credit card in the right fashion can also help a consumer build up a solid credit history.

Still, many Connecticut residents look at the insurmountable credit card debt that thousands of consumers inadvertently rack up and therefore write off these financial tools completely. While credit cards certainly carry their share of pitfalls, using them the right way can only help a consumer.

The main issue that can turn a tiny bit of debt into a total avalanche is not paying off the entire balance. Credit cards are notorious for carrying high interest rates (some cards for retail stores can charge nearly 30 percent), which can compound debt to astronomical rates in a hurry. If a consumer cannot pay off charges made to a credit card, they should stay clear of using one for the purchase. This almost promises that debt will spiral out of control.

Many consumers are good about paying off their entire balance every month, but there are also just as many that do not comprehend the long-term consequences when they rack up purchases with their credit card and carry a balance from month to month.

This is a problem seen more and more as the American economy rights itself. As economic times improve, some experts say United States consumers are leaning on their credit cards a little too much, almost guaranteeing themselves they will be in rough financial shape in the future. Just think of the following situation. You are able to make the minimum monthly payments without a problem, but what happens when you lose your job? Now you cannot even pay the minimum as the debt continues to climb due to interest.

The oft-discussed moral of the story is to use credit cards wisely. If you find yourself buried under debt, measures like bankruptcy are available to help ease the amount of debt incurred.

Source: Financial Post, "Be the master of your credit card debt," Jonathan Chevreau, March 3, 2012

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