Credit cards.

Like most things in life, they have two sides to a point of view: a credit card is a convenient financial tool which allows you to buy things when you need them and pay later; or a credit card is the fastest, easiest way to get under a mountain of debt.

Which is it actually?

It depends on who’s telling the story and like most things in life, both sides are right. At CreditCardsMasters.com, we have set out to untangle the story of credit cards and how to use them wisely and well.

According to a financial literacy survey by the National Foundation for Credit Counseling and NerdWallet, an online resource for financial advice, “…roughly 2 in 5 American adults give themselves a grade of C, D or F on their knowledge of personal finance.” Nerdwallet spoke to three different people about their experiences with credit cards.

Excerpts from NerdWallet interviews:

Holly Johnson: 35-year-old business owner from central Indiana.
She and her husband, Greg, racked up debt several times before realizing their mistakes. “The kind of debt we went into just changed as we got older,” Johnson says. “In our early 20s, it was credit card debt and huge car loans. As we got older, it was loans for home upgrades and more car loans.” One thing Johnson wishes she knew 15 years ago was that when you have high debt, you have to plan your life around it. “It means not doing the things you really want to do because you have to service your debts above all else,” she says.
Miranda Marquit: 35-year-old freelance writer from Idaho Falls, Idaho.
“…began acquiring debt while in college, taking out loans despite having a full-tuition scholarship and a part-time job. “For the most part, I realized pretty quickly I was making mistakes,” she says, “But I sort of stopped caring. … I didn’t need the money to pay for school. However, I liked traveling and going on trips, so even though I knew it probably wasn’t the best idea, I kept right on taking loans.”
John Schmoll: 41-year-old Omaha, Nebraska, resident who runs an advertising agency with his wife, Nicole.
“I used and viewed credit cards as a way to finance the kind of lifestyle I wanted or thought I deserved,” says John Schmoll “The student loan debt was relatively similar. I saw that I would receive extra money and happily took it.” The result was $25,000 in credit card debt and $20,000 in student loans. “I had very little to show for it when all was said and done,” he says. He adds that money was a taboo subject at home when he was growing up. Now that the Schmolls are debt-free aside from their mortgage, they plan to teach their children about the dangers of debt.
Susan C. Keating, president and chief executive of the NFCC.
“Many Americans are spending their adult lives slowly chipping away at a mountain of student loan debt only to find themselves approaching retirement later in life with little or no savings. The stakes are too high for consumers to let misplaced confidence get in the way of sound financial decisions.”

Understanding the credit card

  • Credit Cards have been around for over 60 years. But it still seems to be the one financial instrument that leaves us all confused and confounded. Most of us fail to understand how they work, how to not fall into a mountain of debt, how to maximize the benefits of revolving credit, how to use them smartly and sensibly – in short, make credit cards work for us, instead of the banks, finance companies and retailers that issue them!
  • A credit card is a method issued by card holders (consumers) as a means of payment. It allows the cardholder to buy goods and services, based on his or her promise of paying for them, within a fixed time limit. The bank issuing the card creates a revolving account and approves a credit limit for the card holder – the cardholder than borrows against that limit to pay the merchant he is buying from or withdraws money as a cash advance, the latter not being such a good idea as the interest on this is much higher.
  • Credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card is not a cash or debit card, which are both used like money and depends on the consumer having enough balance in is his account to cover the transaction. A credit card is not a charge card – the latter requires the balance to be paid in full each month, on the due date. The other difference between a credit card and a charge card is that a credit card involves a third party who pays the seller and is later compensated by the consumer, whereas the charge card simply defers the payment to an agreed upon, later date.

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At CreditCardsMasters.com, we have set out to untangle the story of credit cards and how to use them wisely and well.