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show $5,000 in Debt--and Nothing to Show for It

People who consider a credit card "free money" are headed for trouble. Here's an example:

Hired as a co-op student at a credit union, Heather worked hard and received a promotion. She wanted new clothes, so she applied for a credit card.

Heather paid the minimum monthly payment of $20. Because of her payment record, the credit union agreed to raise her credit limit. Heather was off to Jamaica, where she used her credit card a lot.

Heather paid down her credit card debt, then ran the balance up again--again and again. Five years later, Heather owed more than $5,000--and, technically, she still was paying for her Jamaica trip. Twelve years later Heather finally paid off her credit card debt! Not only did she pay triple the amount charged; she was unable to save money.

Start slowly with your first credit card. A smart money management rule is to avoid paying interest on your credit card charges by paying the balance in full each month. That way you'll enjoy the convenience a credit card can bring, but you'll avoid unnecessary finance charges and debt that never seems to end.
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