Credit cards While credit cards can be convenient and in some circumstances, provide cardholders with cash and

other rewards simply for using them, there are numbers of negative effects associated with credit card usage that can have a serious impact on your financial future. Three of them I am going to talk about today are the risk of bad credit, the temptation to spend, and long-term cost and debt overload Many cardholders, especially student credit card owners suffered from bad credit as a result of uncontrolled spends or untimely payments. Here is a graph provided by Federal Reserve Bank of New York, it shows that the percentage of credit card balance delinquent has been climbing up from around 7 percent in 1999 to 12 percent in 2011 and it becomes the highest delinquent category among these 5 loan types. It indicates that there is part of the credit card holders suffer from the risk of bad credits. There are many negative effects associating with bad credit such as: High interest rates on your credit cards and loans, get denied for loans application, difficulty getting approved for an apartment, can not get a cell phone contract, get denied for employment, higher insurance premiums and so on. The second risk of credit card usage is the temptation to spend. There is a lot of evidence that consumers spend more money when paying with credit cards than when they are spending cash. For example, Drazen Prelec reported studies on this topic in Marketing Letters. In his study, he randomly selected participants who would be offered the opportunity to purchase tickets which are highly desirable to an actual professional basketball game that had just sold out. Participants were asked how much they would be willing to pay for these tickets. Those who were told they would have to pay by credit card were willing to pay over twice as much on

average as those who were told that they would have to pay by cash. Another study done by Richard Feinberg, he explored the link between credit cards and spending in an article in the Journal of Consumer Research. He wondered whether people see credit card logos would affects their spending while they were making purchases or leaving restaurant tips. The result is people would left higher tips and indicated that they would be willing to spend more for products when they could see a credit card logo at the time than if they could not. There are many possible explanations for the observation that why people pay more when using credit cards than when using cash. One of them is people may pay less attention to prices when they are paying by credit card. Another finding is that people are better able to control their behavior when they have physical objects that help to guide their behavior than if they have to think conceptually. The third main risk of associate with credit card is the long-term cost and debt overload. If you constantly carry a balance on your credit cards, you may end up paying much more than what you actually purchased. The buy now, pay later mentality that is associated with credit cards can lead to serious debt overload. Here are some statistic show how interest rate and fees affect card holders: 95 percent of surveyed issuers have over-limit fees. 72 percent of card included offers of low promotional rates, issuers could revoke after a single late payment. 36 percent of respondents said they did not know the interest rate on the card they use most often.

Only 15 percent of freshmen student had a zero balance. The median debt freshmen carried was $939. For many credit card cardholders, the most attractive functions credit cards provide are the cash back and rewards program. However, they do not realize the interest and fees adds on their credit account are much more than the cash and rewards they can get back and also make them suffer from huge debts. One way to avoid these risks associate with credit cards is that we can use debit card instead. Debit cards protect your financial reputation. No matter what you do with debit card you never have to worry about the long term consequences that result from bad credit. Debit cards avoid overspending. Unlike credit cards, your bank balance goes down with each debit transaction. You are using your own money and you cannot spend more than your account balance. Better fulfill your financial goal. Without suffering from high interest and debts, using debit card makes you better in budget the daily spending and fulfills the long-term goals Therefore, I strongly encourage you to use debit cards rather than credit cards.