When signing up for free airline miles or cash-back rewards, most people do not consider the potential dangers of credit card debt. Credit cards help build credit, protect against unauthorized charges, and offer useful benefits when used responsibly. However, if not managed well, credit cards can lead to a dangerous debt trap.
How do credit cards work?
Credit cards let people borrow money and pay it back later.
“For the most part, using credit cards and understanding how credit card companies work are pretty straightforward,” said Todd Ossenfort, Chief Operating Officer of Pioneer Credit Counseling. “Just remember, you are expected to pay back any money you spend when the monthly statement comes.”
People can choose to pay back the full amount each month or pay a minimum amount of the balance due.