Consumer Credit Card Traps Could Be Costly
If you are like most people, you have received plenty of credit card offers in the mail. No doubt you have also seen them advertised on the television, in newspapers and in magazines. You can’t get away from them! However, finding the right credit card to suit your needs should not be your only consideration. Using your credit card responsibly is even more important.
Store credit cards can cause you a real problem. Stores often offer new cardholders a discount when they first sign up, which can provide too greater temptation for people to resist. However, a ten percent saving on items you would not have bought otherwise is really not a saving at all. Remember, at the end of the day you will have a monthly bill to pay. So don’t spend more than you can afford.
The main problem with credit cards is the illusion that you are not actually spending money. There is nothing missing from your wallet or purse and it is so easy to flash the card here, there and everywhere.
Credit cards were not designed with budgeting in mind because each month when the day of reckoning comes round there is a payment to be made and even though meeting the minimum payment does not incur late payment fees, just take a look at that balance - it is more or less standing still!
It can be a healthy exercise to calculate how long it will take you to pay off your credit card balance totally if you do not add one more thing to your account. It may surprise you, how many years you will be enslaved to your credit card, unless of course, you are enjoying the benefits of an interest free period.
Most of the major credit cards are accepted all over the world so you only need one, or at most two. This is a much easier way to keep a check on expenditure than having to sort out six or more credit cards as many people do.
Another credit card temptation that can get you in a lot of trouble is the ability to borrow cash on your card. This is known as a cash advance and it enables you to withdraw cash from your card via an ATM. However, this form of borrowing is usually charged at high interest, calculated daily, and is ultimately a very expensive way to borrow. It can be too easy to create a level of debt that is too high for you to service. If you are going through a difficult time, withdrawing money from your credit card can seem a godsend. Unfortunately, your debt can climb dramatically over the course of a few months and with exorbitant interest rates you can find yourself in real trouble. It is also a good idea to stick to a low cost, no frills credit card that offers low interest and no annual fee.
If you are one to use an ATM regularly, you will find that your debt will build up and soar over a small time of just a few months. Interest can go as high as 24%, so avoid this. It makes much more sense to avoid temptations such as rewards and bonuses. Try to opt for a credit card with no frills, no annual fee, and a low interest rate.
Overspending, paying late, and borrowing on cash advances can all affect your credit rating. Therefore, to avoid problems arising from your credit card use, try to use your card as if it were cash. In other words, if you can’t afford it don’t buy it.
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Tags: Credit