Title : The Inherent Dangers of Credit
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The Inherent Dangers of Credit
The recent economic collapse has pointed out that while credit can be beneficial in limited circumstances, it is also an extremely dangerous item that encourages people to live beyond their means with an illusion, backed by debt, of wealth. The main dangers of credit are that it 1) creates an illusion of wealth; 2) promises a brighter future; and 3) justifies impulsive and irresponsible spending.
The most dangerous part of credit, particularly easy credit, is that is creates an illusion of wealth. Credit, especially credit cards, gives an individual the impression that he or she is able to afford more than he or she actually can. A couple that has a combined income of $100,000 for a year really has $100,000 to spend in a year. This must cover food, clothing, housing, and any other items that are necessary or wanted in the year. But, when a credit card is thrown into each wallet with a limit of $10,000, the total amount of spending power the couple has has been increased to $120,000, for a time. This has increased their spending power by 20% and yet their actual income has not increased at all. This has created an illusion of wealth that is damaging to the couple's psyche as well as their longterm financial health.
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