4 Dangers of Using a Credit Card (Even Responsibly)

We all know that you can get into serious financial trouble with credit cards if you cannot pay off your balance each month. But did you know there are even dangers in using a credit card responsibly?

The average consumer is bombarded with credit card offers today. You can’t go into a store without seeing a sign or being asked to sign up their credit card, it seems. And if you’re a traveler, every airline you fly and hotel you stay in sends you offers to get their credit card multiple times each year.

Most credit card offers today are attractive because they offer bonus points, cash back, a free night’s stay at a hotel, or other rewards to entice you to sign up.

Of course there are reasons why everyone and their brother wants you to have and use their credit card. Officially, they want you to be loyal to their brand and use them as often as possible. Of course, they really want you to carry a balance and pay them interest.

But even if you use a credit card responsibly and pay it off every month, there are dangers to credit card use that you should be aware of.

4 Dangers of Using a Credit Card

1. Credit card users tend to spend more.

Research has shown that people tend to spend more when they use plastic instead to cash. According to MSNBC, this phenomenon is known as “the credit card premium.”

This happens because when you pay with cash, you feel the pain of the money leaving your pocket and going into the hands of someone else, but when you use plastic (debit or credit) you don’t feel the pain.

At least with a debit card, you know that when you make a purchase the money just left your bank account. And yes, you can still get great rewards with a debit card.

But when you use a credit card, you don’t feel the money leaving your hand, and you know that it didn’t leave yet your bank account. In fact, it’s still sitting right where you left it, and it’ll be there until you decide to pay the bill. Which leads us to my next point . . . .

2. Credit cards make us think we have more than we actually do.

If we buy with credit cards and don’t feel any pain at the point of purchase, and the money doesn’t leave our bank account until whenever we decide to pay the credit card bill (which could be days or weeks or months or years later) – we can get lulled into thinking that we have more money than we really do.

And this is the slippery slope that gets people into trouble with credit cards, leading some people to begin carrying a balance and, of course, start paying interest.

3. Credit card use makes it easier to buy impulsively.

Researchers have discovered that consumers who pay with credit cards experience a type of euphoria associated with the purchase which exaggerates the benefits of the product and blinds them from the potential flaws and the true costs of the product. According to the Journal of Consumer Research this predisposes credit card users to buy on impulse and make rash decisions – more than if they were using cash.

4. Credit cards can increase the level of our financial stress.

I’ve read that the average American has anywhere from four to ten credit cards. That means four to ten additional accounts to keep track of and manage.

It’s easy to see how fast these cards can add up, just based on the number of offers I receive regularly from Delta, Hilton Hotels, Priority Club, and Choice Hotels. Not to mention the stores I frequent like Target and Kohl’s who ask me if I want to open a charge account just about every time I shop.

So even if you just get the credit cards for the bonuses or rewards, and pay them off every month, the more cards you have, the work you have to do to keep track of them and the more stress you have as a result.

Personally, I’m on a mission to simplify my financial life, not complicate it. What about you?

Have you experienced any of these dangers of credit card use – even when used responsibly? What else would you add to my list? Leave a comment!