Credit: A Powerful Tool, But A Potential Trap For The Unwary

Credit is undoubtedly a powerful tool. In fact, it is in most cases vital to make some of the most significant purchases and investments you need and want to make in life, such as buying a car or a home. Using credit for your every-day purchases can also be beneficial, because you can hold on to more of your monthly cash flow and take advantage of "rewards- programs and other incentives credit card companies offer.

While the potential value of credit is indisputable, it can become a trap for the unwary. Overuse or misuse can have serious, long-term consequences. To assess whether you're headed down a potentially dangerous path in your use of credit, it is helpful to consider your actual purchasing activity and the way you view that activity.

Your Activity

Regarding your actual purchasing activity, ask yourself whether any of the following describes your situation:

• You have no little or no savings
• You make minimum payments on your credit cards
• You have credit cards that are maxed out or close to maxed out
• You charge inexpensive items or necessities (such as food)
• You use cash advances
• You transfer old balances from one credit card to another to get better rates
• You don't know how much your total debts really are
• You have been denied credit, or need a co-signor to get a loan
• You have made late payments, are past due on your bills, or have bounced checks
• You live paycheck to paycheck

Regarding your views about your purchasing behavior, consider whether:

• You hide things from your spouse or family about your spending habits
• You feel embarrassed talking frankly about your financial situation
• You charge things that you could not or would not buy if you had to use cash
• You believe it is appropriate to use credit cards to maintain a certain standard of living beyond your actual means
• You believe it is okay to just keep making minimum payments on credit cards, regardless of how long it will take to pay them off
• You are reluctant to open bills or return calls from creditors

If any of these factors describes your situation, chances are, you're already struggling with serious debt problems related to your use of credit. At the least, you're at risk of running into such problems with debt in the future. The good thing is, you have options. Consider contacting a bankruptcy attorney, who can evaluate your financial situation and explain these options to you.