Guide To Getting Your First Credit Card
Stepping into the adult world presents a lot of new issues you may never have considered before. Among these new problems is how to establish credit. So many people find themselves ready to leave their parents’ home to get a home or apartment of their own only to find out that they can’t get certain things like a place to live and the utilities that go with it because they don’t have sufficient credit.
Sometimes having no credit can be worse than having bad credit. When you are trying to get a loan for a car or a house your future creditors want to make sure you can pay the loan back. They have no records to look at to tell them if you will do this or not. It might sound like a Catch 22, but you will have to start by getting a credit card and making a few purchases.
When deciding which credit card to start with, you should sit down and evaluate some things about yourself. For instance, are you someone who procrastinates? Do you have steady income that will allow you to pay the bills? Why do you want a credit card in the first place? It is very important to be honest with yourself when you answer these questions because it is easy to get into a hole that you can’t crawl out from.
Even if you feel like you are the most irresponsible person on earth, but you still want a credit card, a good one to get is the American Express green card. The Amex card has to be paid off every month, and you may be willing to spend less if you know that there is not going to be a minimum balance.
Trying to find the right credit card for you can be a confusing process. You have to take into consideration the APR, annual fees and a multitude of hidden charges. The best place to start is with the APR and compare those. Many people gloss over the fine print because at first glance it seems like a nuisance to wade through. Try to read it anyway.
No doubt you will find that there is information in there that will save you money in the long run. Credit companies don’t want to hear “I didn’t know”, not when they can point back to the small print and tell you it was right there when you signed your name to the agreement.
When you use your first credit card there are some rules that you should follow. You should always shred your receipts, and also shred any credit card offers that you are not considering. Do not ever give your credit card number over the phone unless you are the one who initiated the phone call to the company that you are ordering things from, or trying to get a bill paid.
Keep the customer service numbers of all of your credit cards in a safe place. Sometimes companies will send you a new card and it will get lost in the mail, an automated system will ask for your information before it will let you proceed, however, if you don’t have a customer service number, you will have to wait until your next bill comes in. You would think that calling the store would help, but incompetence runs rampant in all parts of the world.
When you do finally get your new credit card remember that it is not free money. Everything you spend you will have to pay back. It is all too easy to fall into spending carelessly and getting yourself into trouble when the bills come due. Know your limits and what you are capable of and use your card wisely.
Three Ways To Get Hold of Credit Card Debt
It is very easy, these days, to run up those credit cards to the max. So many things, and bills that you can easily put on them, that they can tend to get out of control. However, with the interest rate that you are paying on them, and possibly some late fees, getting out of credit card debt is not going to be easy. So, it may be time to stop dreaming about what you don’t have, and take some deliberate steps to correcting the problem. Here are some things you can do - and you can use a new credit card to do it.
Get A Credit Card With Balance Transfers
It may be a little hard to believe, but another credit card could very well be a key to help you get out of debt. You will first want to apply for a credit card that permits balance transfers. Most credit cards will now have this feature on them, as an introductory offer. It allows you to take the balance from another credit card and put it on the new one. Generally, you will have up to 15 months to enjoy an interest rate of 0% on any amount transferred.
There are, however, a couple of little tricks that you want to watch out for. There are three of them that involve balance transfers. The first one is that some credit card companies charge you for this option. Some will charge as much as 4% of the amount you transfer - most will not charge you. A second little trick that some employ is that you can only transfer amounts that you list on your application. The third one being that the time frame that you actually get on the 0% APR for transfers is less than the other part of the introductory offer - possibly as short as three months.
Take Advantage of the 0% Interest On The Transferred Amount
Once you have made the balance transfer, it is time to take advantage of it as much as possible. This means you now have the same amount of credit card debt, but now you do not have to pay the high interest - for the length of the introductory offer. The way you take advantage is to pay it down as much as possible, within that time period. If possible, try to increase your payment just to bring it under control - as quickly as possible.
Put Away Your Other Credit Cards
While some may not be able to resist the temptation to use up some of that available credit on the now empty credit cards, you need to forget about them. In fact, you should probably close them down, but leave at least one other card open. It is true that having other credit cards open can help your credit rating.
The best way to control those credit cards is to pay off the total each month. This will allow you to continually get a 0% APR balance, and keep a good credit score, too. Don’t forget, too, that eventually the 0% APR on amounts transferred eventually runs out. If you still have balances, try to get a new card, and don’t max out the old ones again.
Remember to look over the credit card fees, as some of them can be rather costly. Avoid cards with high interest rates and annual fees. You can even enjoy more benefits if you select a card that has rewards that are applicable to your way of life. For instance, if you travel a lot, get one that gives you air miles, and you will get free flights every once in a while - depending on how often you travel - and where.
Choosing a Credit Card When You Have Poor Credit
Poor credit is something that can happen to just about anyone, and it’s not always due to circumstances we could have controlled. Sometimes life events just go beyond what even the most budget conscious could have paid for.
Once you have things back under control, it’s time to start rebuilding your credit. Even if you hope to never have debt in your life again, building a good credit history can help you.
Your credit history can impact your ability to get a job, a car, a home. It can even impact the rates you pay on insurance. Places you wouldn’t necessarily think of may run a credit check on you.
This makes selecting a credit card to help you build up that score very important. You want it to be something that will help you rather than make things worse.
Many credit cards for poor credit have annual fees. These may not sound too bad, and in many cases really aren’t that bad, until you add them on top of all the other fees that may be charged. Some companies have a fee to join and a monthly fee on top of that, to where the fees are costing you more than you may have planned on spending on the card.
Right off the top, make sure you understand the fee schedule before you even apply for the card. There’s no point in paying for a card you’re going to loathe. Take a little time and you can find much more reasonably priced credit cards.
And don’t pay a fee until you actually get the card. This is one of the best ways to avoid being scammed. You may be having a hard time building up your credit, but that’s no reason to skip your due diligence. It’s for your own protection.
The interest rate offered to you matters, even if you aren’t particularly planning on carrying a balance. You might need to at some point, so do take this into consideration.
A big consideration is whether you want to go with a secured or unsecured credit card. You can find these available to you, pretty much no matter what your credit looks like. Which you prefer is pretty much up to you.
However, if you prefer a secured credit card, make sure that it is a true secured card and reported to the credit bureaus. You do not want to be wasting your efforts with a prepaid debit card when you’re trying to rebuild your credit score. The two can sound very similar, so be sure to ask the company when in doubt.
The grace period can be another major sticking point. You want to have enough time that you actually have a chance of getting your payments in on time. You may be capable of taking that bill the day you get it and sending your payment straight in, but what if you don’t? You need a sufficient grace period to allow yourself to comfortably make that payment.
Beyond all these factors, you want to look at what you really want from the card. If you’re going to carry a balance, a rewards card honestly is probably not the best choice, since the interest will probably eat up your benefits.
Going from a poor credit score to a good one takes time, but it’s a necessity of modern life for most people. If you work at it you should be able to improve your credit score steadily and make the move to a regular credit card over time.
The Awful Truth About Credit Card Balance Transfers
This article aims to tell you the awful truth about how banks apportion the month’s repayment of interest by allocating various levels predicated on the different rates of interest that they charge, so that users of credit card balance transfers will invariably be punished for borrowing, whatever they do. It also shows why it is essential to replace that card once the introductory credit card balance transfers period ends.
A premier finance supplier lately launched a television advertising campaign that focussed on the fact that most banks designate peoples’ usage of their cards into particular groups then allocated a particular interest rate to each group. These hierarchies were based on the spending of typical card users. Such people include holders of credit card balance transfers.
If you go by what the advert is saying, most card companies accept the credit card user will begin usage of the new card by transferring a previous balance for an average period of 39 weeks. The deal will be at 0 per cent interest for that time. The user will make a new purchase with this new card that will on average draw a rate of around fifteen per cent.
The card holder may then use this credit card balance transfers procedure for getting hold of some quick cash with the same card (never a good strategy!). Your interest rate for taking out cash is higher than the rate for purchases, and this is on average between 17 per cent and nineteen percent but can be as much as 23 percent or even more than that.
Now here’s where the financial trickery starts. When it comes to the monthly payment, the credit card balance transfers card lender will put the least expensive transactions at the top of the queue when the time comes to pay the minimum, or whichever level of repayment has been chosen.
Therefore the costlier aspects of your account - usually the cash borrowing - is effectively ignored where it will rack up greater and greater amounts of interest, and where all that interest will be further compounded and carried forward when interest is charged to the existing debt (we all know how it works, don’t we?)
Your average user of credit card balance transfers may believe that they are paying off the debt in a uniform way, and that if one type of cash attracts a higher interest rate then that will be balanced out by the goods purchase which will be charged out at a lower interest rate. But of course that is not what is happening. The fact is that the finance company will always put the less costly portion first in the paying hierarchy, and allow the costlier elements to burn your money away.
These costlier elements will be last to be paid, and you are not in control of this. To take a typical example, for the nine month usage of an average credit card balance transfer’s interest-free period all the payments will be used to pay the interest-free part while the more expensive purchase (or cash) borrowing clocks up the interest.
Crucially, the more expensive part of the borrowing will be at the back of the queue, clocking up the interest, and this is paid off last, if ever. Last of all to go will be the cash advance, with its massive 23 percent or whatever it is. The bitter irony here is that the longer the so-called interest free period of grace, the longer the length of time this amount is allowed to rack up the interest! Then when you add on the percentage charge that most credit card balance transfers nowadays charge for making that balance transfer, then you know why the banks are making so much money out of us.
The only answer to this is to get rid of the credit card balance transfers at the end of the zero interest period by transferring the entire balance to a new card. That is the only way to do it. To do otherwise is to invite a cycle of endless debt.
Choosing The Right Student Credit Card
Having the amount of cash you need on hand when you need it is important when you are a student. What may be even more important is that some credit cards will save you more money than others allowing you to have even more money on hand if you are on limited budget. Here is how you can choose the right student credit card and get more money back.
Student credit cards come with a variety of benefits. Each category is designed to be of particular benefit according to your specific needs. This way you choose the kind of student credit card that will be the most benefit to you. These cards range from driver’s cards, which give points or rebates for the gas and car repairs you pay for, to entertainment cards that give points for going to movies, purchasing DVD’s, CD’s and other electronics, to air miles for your flights and hotels.
By choosing the type of card that you need - or according to your greatest expenditures each month, you can get discounts, cash back, or even free stuff like trips, tickets, free movies, tickets to Disneyland, and more. Normally, most student credit cards have two levels for giving out their points. A higher level focusing on the type of card it is, a gas card will give the most points for gas purchases at their brand of gas station, but will give fewer points or cash back for other purchases, like food, restaurants, and clothes.
Most student credit cards have a higher interest rate, simply because you either do not have a credit rating yet, or have not had enough time to have earned a reliable credit score. This means you should look at the credit card as a tool to build your credit score. Right use can mean that you can get bigger amounts of credit for those larger items you want to buy when you get out of college - or even before you finish.
Before you sign the agreement, though, you want to do some comparative shopping and read the fine print. Credit cards, like anything else, have good ones and not so good ones. Start by looking at the interest rate. Select one that is about as low as you can get. After the introductory period wears off, you will be paying this rate if you do not pay the card off in full each month. Also, compare the various fees, and find the one with the lowest fees. It should also allow you to make balance transfers, too, without charging you for it.
Credit cards for students may or may not require a consignor. While some do not, the credit limit will be low to start with - again, until you build a credit rating. Watch out for being late with payments - this could place you instantly, regardless of the introductory offer, into a higher interest rate.
Another possibility is a prepaid student credit card. These act like debit cards in that you make a deposit and then you can use the card to access your money when you shop. You do not need a credit score of any kind to get this kind of card - or even a job. Some of them will allow you to build your credit rating. If that is what you want (recommended) then make sure the credit card company reports to the credit bureaus. There will probably be an extra fee for this service.
When Considering Credit Card Benefits, Are Reward Cards Really A Bargain?
Most people get credit card offers in the mail all the time. Each card offers you something a little different in order to get your business. Now credit card companies are using reward systems to get people to sign up for their card. For the consumer this is great. You can now get rewarded just for using your credit card that you were going to use anyway. There are a few things to look for when you choose your card.
First you will want to know which card is offering what. If you travel you will want to get a card that is widely accepted, if you do not travel you may not care as much. Each credit card will offer you something different to try and get your business. They will always be trying to give you a better deal so you will choose them.
Next you will want to know what kind of reward system your credit card uses. If you travel a lot you may want to choose a card that rewards you with frequent flyer miles. This is a good way to get some free miles just from using your card on a regular basis.
You will want to see how many miles you have to have before you can cash them in. If you have to have a huge number of miles if may be very hard to reach the amount. You will also want to know how much money you have to spend to earn a mile. Another thing you will want to know is when and where your miles can be redeemed. You will want some flexibility with when you can take your vacation, and where you get to go.
Other rewards may be in the form of points. You may be rewarded points for the dollars you spend on your credit card. Again you will want to know how many points you get for every dollar you spend. You may also want to know what you can use your points for. Some cards are more flexible with what your points can be used on. Some cards let you convert the points into dollars that can be subtracted form your balance. Some have some great things you can buy with your points.
Cash back is another reward that is very popular. You can earn a certain percentage cash back on all you purchases. This is a great way to earn a little cash. You will want to know what percentage you are earning, and when you can get your cash that you’ve earned. Some companies will only let you use this cash at certain retailers, while others will let you use it towards your balance, or use it for gifts they have available, while others may send you an actual check for the amount. You will want to know how much flexibility your card offers before you choose.
Interest rate an annual fees are another thing you will want to check into. Some of these cards will look great, but will charge you more in fees to make up for your rewards. If you do not read carefully you may not be getting to great of a reward after you pay extra in interest rates and fees. Make sure you look around and find the card that will work best for you.
Credit Card Debt Statistics
Do you have any idea just how common credit cards are? Let’s take a look at a few statistics from the USA.
The average family carries a balance of between $5,000 and $8,000 on all their credit cards, depending on which figures you believe. Over $1,000 per family goes on interest every year. And that’s just the average - some people owe much more! Overall, Americans spend over $1 trillion every year on their credit cards, and owe more than $500 billion of it.
If debt continues at the current rate, then one family in a hundred will be forced into bankruptcy. Over 90% of Americans’ disposable incomes are spent paying back debts. Whatever happened to saving?
Debt Costs Everyone Money.
Literally billions of dollars are being used up on expenses that are only created because of the existence of the credit card industry. The weight of the calculations, administration and marketing needed to support the industry is immense - the average American gets at least one credit card offer in the mail every day.
That’s before you take into account the burden bankruptcies put on the court system, and the cost to the government of providing subsidized debt counseling. You might also note that consumers with more debt have less to spend - and when money isn’t flowing, it hurts the economy. There are very few industries or people that aren’t hurt by debt, at least in the long run.
Debt is Much More Common Than It Used To Be.
It’s not so long ago that being in even a little debt was considered to be absolutely terrible. When you wanted something, you saved up for it, and bought it once you had enough money. If you had bad credit, you couldn’t get a credit card at all. Go back fifty years and consumer debt figures were absurdly low, the same way they are today in most of the non-Western world.
In the West, though, the art of saving seems to be a lost one - almost no-one is saving enough for their retirement, and banks are having to offer ever-higher interest rates to get people to put money anywhere near a savings account. We have an ‘I-want-it-now’ consumer culture, and we’re willing to pay more than we can afford to fund our lifestyles.
Spending Isn’t To Blame.
Now that I’ve said that, don’t think that the reason you’re in debt is that you haven’t spent your money cautiously enough. According to statistics, it is very rare for people to get into debt because they spend their money frivolously. Far more people get buried in debt because they lose their job, or get sick - they take out credit cards to pay for basic expenses, and fall into the interest trap. Their debt spirals out of control from just a few thousand dollars borrowed to pay for essentials.
Most people have a reasonable sense of what they can afford, and won’t go out and use credit cards to buy things that they wouldn’t usually be able to pay for. The problem is simply a matter of people leaving their balances on credit cards for too long, not realizing just how high the interest really is.
Some Of The Top Credit Card Mistakes
When you’re dealing with credit cards, you’re playing with fire. Unfortunately, there are plenty of people out there who don’t realize that, and make all sorts of dangerous mistakes with their credit cards every day.
Paying Late.
If you don’t set up any kind of automatic payment, then it can be tempting to just put your credit card bill on a pile and get to it when you have time. Before you know it, a few weeks have gone by and you’re late. If you leave it to the deadline, you might find that the payment won’t get there quickly enough - it’s not a deadline for sending the money, it’s a deadline for them receiving it.
Paying late is a big mistake for an awful lot of reasons. You will almost certainly be charged a late payment fee, and your late payment will go on your credit report for everyone to see. You may also find that you lose any good rate you had, and your debt is automatically thrown onto the very worst rate the company offers.
To avoid late payment, you should always post your payment a long time before the due date (at least a week). If you’ve left it to the last minute, phone up and try to pay that way.
Being Taken in By Rewards.
It is never, ever worth getting a higher-interest card simply because it offers some kind of loyalty points, flight miles or whatever. Even if it offers a cash reward, it is unlikely to be more than you would pay in extra interest - after all, why would they give you free money? All ‘rewards’ do is pay you off with your own money to make you feel like you’re getting something for nothing. You’re not.
Collecting Cards.
Seeing some people opening their wallet or bag is a scary experience. It looks like they have about a hundred credit cards in there, some of which they haven’t used in years. They have trouble keeping track of all the different cards, balances and interest rates. Don’t be one of these people. You should limit yourself to a maximum of three cards at a time - any more starts to make you look over-committed in your credit report, and could get you turned down for a bigger loan.
Maxing Them Out.
Your limit is just that: a limit, not a minimum! Whatever you do, don’t get a card and immediately spend your whole limit. This looks very bad. It is better to spend about halfway regularly and pay it back. Wait for the company to increase your limit (which they quickly will), and then you’ll get that extra money without the stigma of having a maxed-out card.
Not Reading the Terms and Conditions.
Finally, as ever, don’t sign anything you haven’t read! I know it’s hard going and you’re busy and all, but if you can’t manage to read the terms and conditions then you shouldn’t get the card. Pay special attention to any future increases in rates, and what kind of fees you can be charged.
Cash Back Credit Cards - Are They Worth It?
There are a lot of people trying to get a cash back credit card - but are they for real? The lure of getting cash back has a lasting appeal, especially in days when people are feeling a financial pinch. But are they really worth what they promise? Here are some ways you can make sure that you get a real deal when you apply for yours, plus some tips on things to watch out for.
Know How To Use Them
Credit cards are of the most value to those who know how to use them. This means that you can get the most benefit from a card simply by not leaving a monthly balance on the card, and by making payments on time. So if you can follow those two simple rules, then you can qualify to get the best benefits from a cash back credit card.
Choose A Type Of Card
Every one has a certain type of credit card that they can profit from the most. For instance, a gas card will profit those the most that drive a lot of miles each month, and need to maintain a car, or spend time in a hotel. This is because the points that are given for your purchases can be used toward hotels, and you may get the most cash back for your purchases of gas. Some gas cards will even give you points for car maintenance expenses, and possibly the points may even be applied toward buying another car. A card that is selected for your greatest monthly expenses will give you the most benefits.
Also, see how much of a percentage of cash back is given toward your more ordinary purchases - like food, medicine, and gas (if it is not a gas card). This can go anywhere from 1% up to 6 % for some products. Obviously, you want the highest percentage you can get.
Get One With Balance Transfers
This feature is especially important if you have balances on other credit cards. You can transfer them to your new cash back credit card and enjoy a 0% APR balance for up to 15 months. This gives you great savings in interest and can help you to reduce those other credit card debts, if you will pay the same amount on the new credit card.
Don’t Lose Your Rebates To Fees And Interest
This is one way that many people lose their benefits. Not comparing the various features listed in this article, and following its advice will often reduce their benefits reduced to a big fat zero - or less. Although they will get some rebate checks, they need to add up their late fees and interest for each month in order to determine if it really is good deal.
Choose a cash back credit card with a low rate of interest, no annual fees, or a lot of other fees. In addition, remember that by using it right, you also are building up a credit score - one that will allow you to buy the big purchases - especially if you don’t have all your credit cards maxed out.
What Benefits Does A Travel Credit Card Offer?
If business or pleasure frequently take you to other destinations, then you will certainly want to take advantage of a travel credit card. These credit cards offer a number of options which can give you a great deal of savings over time, including free flights, merchandise, hotels rooms and much more. Here are some of the benefits of a travel credit card, and what you need to know to be able to select the right one for your needs.
Travel cards, which are usually also called air miles credit cards, are very popular - but are not all the same. Some of these cards will only allow the points earned to be used to purchase other air travel tickets. This is rather limited when compared to what other credit cards will do. The point system will vary, too, as well as most of the other features.
If it is just the miles that you want, you will quickly find that you can get miles on many different types of credit cards. While some cards do not particularly give you air miles, the points that they do give can often be translated into air miles and then used accordingly - with certain airlines. Besides the airline credit cards, this includes hotel cards, bank cards, diners cards and even your more typical rebate and even some debit cards.
Travel credit cards offer a number of ways to earn the points you get. Most will give you one point for every dollar of purchase, but for many cards, this is about all they will give you points for. Other cards will usually offer a large up front point package when you make your first purchase - usually between 5 and 20 thousand points. Some cards will give you extra points when you fly on their airline.
Beside all the points, though, which is a great incentive, you also need to look at the other features of the travel credit card, too. Look at the interest rate, because if you leave a balance on the card, eventually that is the rate you will be paying. Then look to see if there is a balance transfer option. This is great to use if you have balances on other cards and are paying interest on it. Transfer the amounts and get an interest free period to reduce your debt.
Be aware of some little things like when your points expire. This could be bad if you are hoping to get a free trip in a couple of years to a nice vacation spot - only to discover your points have vanished. Also be sure to look and compare the various fees that apply, and the length of time given for the introductory offer as it could be as little as three months or as long as fifteen.
One other thing you will want to look for. This involves the availability of the airline. If you get an airline card, then you will want to make sure that it flies out of your local airport and that you can get a flight back on it, too. This should apply to most of your destinations, or you really will not be able to get the most benefit out of that type of credit card. Instead you may want to go with a bank card that you can use on nearly all airlines and still get a lot of points.
Free Money Or Credit Card Debt?
Every time an individual goes to the grocery store, the items in the cart may be less, yet the total bill is still higher. Likewise, based upon the prices at the pump, consumers may often wonder if the tank is being filled with liquid gold.
In general, the cost of living seems to be rising faster than the typical household budget can accommodate. No problem! If cash is short, simply whip out the little plastic rectangle from the wallet, and basic needs, and many wants, will not have to be sacrificed to a shortage in finances. Actually, used in excess, credit card debt can fast become a really big problem, and insurmountable financial woes are lurking around the corner.
Used in moderation, credit cards are an excellent tool for making necessary purchases. For example, possessing large amounts of cash seems like tempting would-be pickpockets and muggers to “pick me!” Rather than opening a wallet to reveal the entire vacation budget, travelers often opt to use a credit card for financing the journey. Actually, the practice is a smart idea, under one vital condition: avoid credit card debt; pay the subsequent bill in its entirety.
For the rare individual, a credit card is an excellent means of controlling the budget and earning cash back, or significant travel rewards. Used carefully, a credit card can be implemented for paying all the regular bills, groceries, and gas. Then, at the end of the month, when the bill arrives, the amount is paid in full with a single check or an electronic funds transfer.
Unfortunately, a growing number of credit users are experiencing the financial woes of credit card debt, because the bill cannot be paid in full during the billing cycle. Month after month, the unpaid balance continues to grow, and in no time at all, the card is maxed out. In addition, once someone has one active credit card account, the mailbox is soon inundated with offers for introductory rates on additional cards. Soon, one card-for emergencies only-soon becomes 2, 3, 4, or more cards.
At first, the credit seems like “free” money. With only a signature, a consumer can purchase the perfect outfit, electronic device, or any number of wants. Yeah! Tired of always having to feel deprived, or shopping for sales, the card seems like a dream come true, until the bill arrives, and the person wakes to a real-life nightmare. Now, the budget is even tighter, to included the new credit card bill/bills. Spending is out of control, and the consequences of credit card debt can be devastating.
The consequences are bills, bills, and more bills, compounded by the excessive interest on the unpaid balance. Generally, credit cards charge 18-23 percent interest. While the numbers may seem insignificant at the time, the additional monies owed for the privilege of paying the balance back over a long period can add up quickly. For example, an individual finds a nice television set on sale for $500. Instead of saving and purchasing a set when he/she can afford it, the credit card comes in handy.
Now, assume the credit card company charges 18% yearly interest, and the minimum monthly payment is 10%. An individual will take 2.5 years to pay off the single purchase, which will end up costing a whopping $575. Actually, most credit card providers only require a 2% minimum payment. Refigured, the single purchase will take almost 4 years to pay off, and the interest amount is an unbelievable $198! Free money? Nothing can be farther from the truth.
Credit card companies are not benevolent individuals graciously helping people out of the budget crunch. Like any business, the object is to make money. Instead of kind benefactors, some credit card companies are better described as relatives of loan sharks.
However, instead of breaking a person’s legs if he/she is unable to pay the bill, credit card debt can destroy good credit. Now, the individual will have future trouble purchasing a car, buying a house, qualifying for student loans, etc. For some, bankruptcy is the only way out of credit card debt, and he/she can lose everything.
However, before diving into total depression over credit card debt, observe the light at the end of the tunnel. Free services are available to help people negotiate with lenders to reduce the amount of interest. Also, the debt counselors can consolidate all debts, reducing the interest rates, and bringing the payments down to a manageable amount, with a catch. The debtor is no longer allowed to purchase anything on credit, until the balance is paid. Otherwise, credit card debt will only get worse, with no recourse.
The best advice: do not depend on credit to fill shortcomings in the budget. Instead, refigure the budget, learn to conserve, do without, and save for major purchases. In the event a credit card must be used in true emergencies-like unexpected auto repairs or emergency room visits-pay the bill off as soon as possible, and always pay more than the minimum amount. Also, if the temptation to spend in advance is too strong, cut up the credit cards and throw them in the trash.
In summary, credit card debt is a growing problem. While the convenience seems like free money at the time, the consequences can be financially devastating. Although a credit card is great for emergencies or vacations, pay the balance in full or as soon as possible. Always pay more than the minimum payment requested, and stick to an affordable budget.
