Credit is a double-edged sword. It allows you the freedom to purchase items that are otherwise unavailable to the cash-only consumer, such as hotels, travel, online transactions, and rental cars. The sharp edge of this sword is obviously your obligation to repay the debt. Used carelessly, overwhelming credit card debt can ruin your FICO score, and put an incredible strain on your goals to achieve financial independence. Remember, responsible people don’t create debt with the intention of never paying for it. Use credit wisely, and remember that shoppers with credit cards handy spend an average of 34% more while in stores than those who do not charge their purchases.

Credit card horror stories are everywhere, and there is a good chance you know somebody who has experienced something similar to this:

A young college student received a credit card offer in the mail. As a full-time student, he did not have a steady income and wondered how he managed to qualify. His credit rating was based entirely upon his potential to earn income as a future college graduate, and the complete lack of negative information in his file.

The student carried his freshly minted card in his pocket for several weeks, resolved to never use it, except for an emergency. Near the end of the semester he and a few classmates were pulling an all-night group study session in preparation for final exams. Around midnight somebody suggested they call out for pizza. They pooled around twelve dollars in cash between them and nearly gave up in frustration when our hapless credit worthy student volunteered his credit card. It was a small beginning, as these things typically are, but credit use is like an addictive drug. It is so easy to use, and the pain of repayment is always somewhere down the road—too far away to be associated with the enjoyment of pizza tonight. Read More