There was a time long, long ago when purchases required planning. Customers paid with cash or checks issued from their bank accounts. Money had to be available to pay for purchases, and was saved prior to the purchase of bigger items. Purchases required conscious decisions about both the need for products and sufficiency of funds.

Layaway was a marketing tool that enabled customers to reserve merchandise while payments were made. Once the item was paid in full, the customer received it. This arrangement seemed to work well despite the inconvenience to customers and stores.

Fast forward to today, when statistics indicate most purchases are made with credit cards.  Customers and merchants enjoy the convenience of swiping cards. Customers don’t need to have enough cash to cover every expense. A card extends credit that might otherwise be denied by lending institutions. The merchants are happy to no longer have to deal with cash or checks.

Shopping with a credit card is convenient and uncomplicated. But it becomes easy to buy on impulse and overspend. When credit card bills arrive, the amount spent the previous month often exceeds the available money to pay. Credit card companies are more than willing to extend credit should the customer be unable to pay the balance. A reprieve, but at what cost?

Before getting behind on a credit card, it’s helpful to check out the minimum payment warning on the statement. It will say how long it will take you to pay off the balance, assuming more charges aren’t added. The interest rate is many times higher than borrowing from a bank. Some credit card companies charge 30 percent and up. Research the negatives of carrying a credit card balance.

The gift-giving season is upon us. Purchasing with a credit card might allow an immediate solution to the desire to buy a gift. But watch out. According to Lending Tree, total credit card debt in the United States topped $1 trillion at the end of the third quarter. According to the same report, 56 percent of active credit card users in the U.S. carried a balance.
This results in a staggering amount of personal debt.

Credit cards aren’t inherently bad. The amount of personal debt on credit cards proves not evil intent, but a lack of financial literacy. A good rule of thumb is to never put on a credit card more than can be paid in full upon receipt of the bill. Credit cards are a great financial tool when used properly.

Credit cards with unpaid balances represent debt. NerdWallet distinguishes between good debt and bad debt. Good debt helps you acquire appreciating assets, like a house or business. Bad debt doesn’t provide something of ongoing value to the person who owes it.

Credit card debt can have a significant effect on your net worth. Matt Schulz with Lending Tree wrote credit card debt in this country is one of the biggest barriers to building wealth: “When you carry a balance on your credit cards, you not only have to pay interest on that debt, but it also reduces the amount of money you have available to save and invest.”

The air is filled with Christmas music and aroma of baked treats Store fronts glow with decorations. It’s the gift-giving season. Unfortunately, the lack of financial literacy has citizens stressed on a treadmill of indebtedness.

Perhaps a gift could be given to satisfy both needs. “Economics in One Lesson” by Henry Hazlitt constitutes an excellent source of economic knowledge. In his succinctly written book, Hazlitt offers an engaging analysis of economic fallacies with real world examples that resonate with readers. There are numerous economic books from which to choose, but none more to the point or enjoyable.

Do someone on your gift list a favor. Help them become financially literate. Buy them a book so they can avoid the pitfalls of spending more than they can afford by thoughtlessly charging ahead.