|
Top Ten Tips Pitfalls Of Credit Cards
By: Max Hunter iSnare Expert Author
Dodging through the Hazards and Ensuring YOU Have the Right Deal
A credit card can be amongst the most important tools you’ll ever have at your
disposal. By offering you easy, flexible and sometimes relatively cheap spending
power it can be used to spread the costs of home essentials, the occasional
luxury, or sometimes just to plug the gap ahead of pay day. Used incorrectly,
however, and it can lead to a stream of debt problems that can take over your
life.
Common sense is the most important ingredient when dealing with financial
products. Apply this and a little restraint and you should be okay.
Nevertheless, the multitude of advice on offer can be overwhelming. Who,
exactly, do you listen to? To simplify matters, and make it easier for you to
get the best deal possible, we’ve compiled our top ten tips for steering past
the hazards and ensuring YOU have the right credit card deal.
1) The first and most important thing to understand before you even consider any
financial product – particularly a credit card – is this: You must have income
sufficient to pay your current bills and overheads PLUS any new financial
undertaking. Don’t be taken in by the polished words of a lender’s marketing
literature: it’s an assessment only you can make.
2) Be smart and be cautious. If only credit cards with a high rate of interest
are available to you, don’t go mad with spending on them. Use them for small
purchases and pay off the balance in full at the end of every month. That way
you minimize interest payments, but also – by paying back in a timely manner –
you prove your worth as a lender and boost your credit rating. This will enable
you to get lower APR on future credit card deals, and boost the chances of
larger credit lines being made available, such as auto loans and mortgages.
3) The very nature of borrowing means that interest increases over time and if
it isn’t dealt with promptly, it can spiral out of control and land you in
trouble. Particularly with credit cards, when interest payments are large, and a
minimum payment offers a seemingly manageable solution it can lead to
unmanageable debts if not attacked properly. What actually happens if you just
pay the minimum payment is this: the balance is barely eroded and might take
many years and many dollars in interest rates to disappear. You need to adopt a
radical approach, where chunks of debt are eaten away each month.
4) If you have a large outstanding balance, don’t just let it sit there
attracting large interest charges. Consider a credit card balance transfer to a
lender offering a lower rate of APR. This will mean you spend less on interest
payments each month and start to attack the overall balance with real venom.
5) A large balance and no immediate prospect of paying it off can be a
nightmare. Don’t just pay the minimum payment each month – this is playing into
the hands of the credit card company. Consider taking out an unsecured loan as a
way of consolidating your debt. Personal loans can give you a consistent cheap
debt, and as you must make the repayments each month, it helps provide structure
to your repayments. Those with poorer credit scores might not always get the
best rates, but it’s still often a cheaper option than paying back credit card
debt each month, and even in the long term a faster method of repayment.
6) If you feel you might be in trouble with credit card borrowings, don’t feel
stigmatized by your debt woes and don’t bury your head in the sand. Help is at
hand should you seek it, and a solution is never far away.
7) If you have a poor credit record, the sad fact is that you’re most vulnerable
from the unscrupulous machinations of rip-off lenders. Be wary of "special
deals" touted for credit cards for borrowers with poor or no credit history,
especially if they're being offered by small-time lenders. Poor credit deals
often involve inflated interest rates and onerous repayment terms.
8) If you have a large outstanding balance, but money in the bank – use your
cash! It might sound obvious, but the interest paid on savings is usually far
less than interest charged on borrowing, so paying off debts with savings makes
plenty of sense.
9) There’s a vast array of different cards on the market – not just credit
cards. ATM cards, charge cards, even different types of credit cards can be
confusing to many consumers. Make certain you know what you’re letting yourself
in for before applying. The wrong financial product can be a costly mistake.
10) Remember: If it sounds too good to be true, it most likely is.
So long as you’re sensible, however, there should be nothing to worry about. If
you’re aware of some of the pitfalls; are cautious, without being too wary; and
mindful of the commitment you’re entering, you’ll be fine.
For many people, credit cards provide sensible short term, flexible lending,
that’s both cheap and convenient. You should always try and proceed carefully,
but tens of millions of Americans use credit cards cheaply and conveniently
every year. With a little common sense, you too can be one of them.
About the Author:
Max Hunter is the author of many credit related articles. If you are looking for help with Home Loans or any other type of credit issue please visit us at http://www.creditcardunlimited.com |
