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What are the dangers of easy credit?

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If used wisely, credit can help us manage our finances and enjoy the things we want in our lives. But when buying things on credit becomes a habit, it’s easy to forget that the money we borrow must be paid back some day. We are more likely to spend more than if we paid with cash. Here are some of the dangers to watch for: 
  • Spending the full limit on your credit card, instead of spending only what you can truly afford – and pay back – each month.
  • Borrowing money on one credit card or from one lender to pay off another.
  • Getting a bigger mortgage than you can really afford to pay. Even if you have a low interest rate now, rates can change when you renew your mortgage. Some people have lost their houses this way because they couldn’t afford the new payments.
  • Accepting too many offers from lenders, including retail stores and credit card companies. This can hurt your credit rating.
  • Taking out payday loans or using cheque-cashing services. This is a very costly way to borrow and can set you up for more debt in the future. To learn more, read Why should I avoid cheque-cashing or payday loan services? on this web site.
If we spend more than we can afford, the interest charges on credit cards and other kinds of credit can build up and cause serious financial problems. Remember: it is far easier to get into debt than to get out of debt!


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Here are some related link(s):
[1] The Dangers of easy credit – BBC News  This audio program gives insights into the dangers of easy credit and the impact it can have on your life.
[2] The Dangers of Incurring Debt to Finance a Lifestyle - Articlesbase This article provides cautions against using credit to finance your lifestyle.

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