Using credit cards

Getting your first credit card can give you a feeling of strange power. Suddenly you discover that when you present this rectangle of plastic, merchants will sell you goods and services, even though you’ve given them no money.

But that stuff isn’t free. When you use credit, you’re buying time — the delay between when you purchase something and when you have to come up with the money to settle the bill.

In fact, if you don’t pay your bill in full and on time, using credit costs more than you would have paid if you’d used cash, because of the finance charges you pay on your outstanding balance. When you buy something with credit, you need to ask yourself if you’ll be able to pay for it at the end of the month. If the answer is no, the next question is whether it’s worth the extra cost — not to mention the need to commit your future money to paying for things that may have worn out or that you stopped using before you’ve paid off what it cost you to buy them.

One challenge is that because credit is so convenient, it’s possible to get yourself into unaffordable debt if you’re not careful.