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Credit cards can be one of the most useful tools in tracking your expenses. It is great how they work. You make a purchase on your credit card, the charge is sent to the bank, the bank approves the transaction, and the bank posts it on a website or makes it available for you to download into your personal financial software. You can't beat the ease of use. If you pay the balance at the end of each month there is no expense for this service. In fact with many of the reward programs available many banks will basically pay you to use their credit card. This only works of course because many people do not pay their balance at the end of the month. If everyone did, the banks would start losing money and they definitely wouldn't have any of those programs that give you free flights or points toward buying merchandise. The average amount owed by an American with credit cards is over $8,000. Only 1 in 20 Americans have over $8,000 in credit card debt, but many of these have so much more credit card debt, that it swings the average up to $8,000. For the banks this is a windfall. The interest rate on credit cards is very high, so they make a tremendous amount of money of people carrying balances. If you have the discipline to pay of your balance at the end of each month and not spend more than you have (just like a checking account). You'll basically get the credit card service for free--paid for by people who don't have enough discipline to pay off their balance each month. You get free record keeping, free reward points, and many other features. Many credit cards offer some type of insurance if your purchase is stolen. Others offer extra life insurance policies for air travel booked on their cards. Some credit card companies offer extended warrantees on anything you purchased with their card. One of the most important benefits of a credit card company is the fact that they will usually stand up for a good customer that is being charged in correctly. For example, lets say you cancel an order with a merchant and they ship you the goods anyway. When you try to return the items, the merchant says that you can't. A quick call to your credit card company will probably be all that is necessary to resolve the situation. Credit card companies can revoke money from merchants and this is exactly what they will do if you complain that you were shipped an item that was canceled. All in all there are many benefits you can obtain by using a credit card--all for free as long as you pay off your balance at the end of each month. Other people aren't going to pay off the balance and they are paying for you to get free service.
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