Top Ten Tips Pitfalls Of Credit Cards
By
Max Hunter
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
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