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Credit cards are practical tools but in times of economic crisis they could easily become two-edged swords because the temptation to use them usually generate debts that while difficult to pay under normal circumstances, become terrible if the economy suffers.
Our world is depending too much on credit; if credit fails everything drops to the ground. Some of my ancestors were bankers; not the guys working at a bank, but the owners, and they did a lot of money by earning more that they spent. If you live by credit and don't save, they you will most certainly not end like a banker.
And that's what happens when credit cards are abused; these gadgets are very handy for doing some web shopping or travelling, but they are not good for consuming daily goods. Investing is one thing and consuming is a very different matter.
Whenever you travel a credit card eases many things significantly: Just think that you don't need to take with you so much cash or change it into one or more foreign currencies, saving time, inconvenience and possibly costs derived from exchange rates and the small change that you always get at the end of the trip but cannot change back. This is one of the few cases in which it is better to consume using a credit card than any other form of payment. But even while abroad, your card should be used as sparingly as possible because - you should remember - whenever you use it you are adding up to your debt.
Credit works best when you are investing in something that will give you more value in the future; using a credit card to buy food to eat or consumer products that will be discarded or emptied soon thereafter is not investing. In both cases you pay the interest rates applicable to the use of a credit card but when you invest, you can finance those costs with part of the increased value that you receive as a return for your investment. If you just consume, things become more expensive using a credit card.
By consuming with credit cards you may well end up living above your true financial possibilities and so the debts mount and one day they become impossible to pay. Using credit to finance growth is very different and means that you will always end having more material capital like a new house, furniture, pictures, jewels or other things that increase value over time. Intellectual properties, knowledge, software and other immaterial assets should also be considered investments. So, it would make sense to pay educational material with a credit card, but not a dozen of bananas for lunch.
But another problem that is always confronted is temptation: Companies that issue credit cards and those that sand for a profit in their usage - banks, for example - heavily promote the use of cards. So, publicity and all sorts of offers abound, and they may even be good deals for the consumer if you just limit your focus to them, but when you see the big picture what actually happens is that such offers contribute to create spending habits that if not checked, end in the log run in huge debts.
Self-discipline then becomes an important factor to keep personal finances in check and to make our capital survive instead of having to use it to pay huge and absurd debts. If we cannot exercise control over our own spending patters using credit cards, then the best solution would be to limit as much as possible the number of cards in our possession. Living without credit cards or with the absolutely minimum number of them is perfectly possible and while it may appear daunting in the beginning, in the long run it contributes to generate healthier spending, consuming and investing habits that will impact positively on your quality of life while preparing you more for confronting financial crises and survive them.
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