Most of us, at one time or another, have looked at an item and thought “That would make my life so much better – now if only I had the money to buy it”. Credit is the solution used by many people in this dilemma.
In many ways, it is as though a bank were saying to the person “No problem, you can have that item. I’ll pay for it now, and you can pay me back over time”. In this, the bank is acting as the generous friend who reassures you that you can have what you want without needing to worry unduly about how you’re paying for it. But looks can be deceiving, and the banks and credit card companies are not your friends. Don’t misunderstand. They are in the business to make money — yours!
A friend might be willing to let you slide on payment her back if things are a little tight this month. After all, you’re friends. You have a relationship. As much as your bank or credit car company would says it would like to develop a relationship with you, they do not – and cannot – operate in this way. Their business relies on being strict with how they control credit. They can’t afford to be your friend.
In fact, the honest truth is, they don’t want you to pay them back. They make more money when you are let with your payments or pay only the minimum due instead of the full amount. And if you’re a little short this month and can’t make your payment, suddenly you are on your own. So much for that “relationship” you thought you had!
You have to be very careful when borrowing from a bank. It really makes sense to be careful with any borrowing – no-one likes letting a friend down. But when banks are involved, being in debt can be a very lonely experience.
Even worse, once you get behind in your payments, it seems almost impossible to get caught up again. The late fees and over-limit fees start kicking in and the interest rates start climbing. In a matter of months, your circumstances can take you from living well to financial ruin. I know, I’ve been there.
That’s why I don’t recommend you go into debt for anything short of a business loan or a home mortgage. Even then, if you can save the money instead of borrow, that’s a better way to go.