Tips To Avoid Common Credit Card Pitfalls
Monday, December 12, 2011, 2:00 AM | Leave Comment
You charge an amount of your purchase on your credit card. At the end of the month, you receive the bill. If you think you have spent a lot more than you can pay, it’s so happens that you don’t even want to look at the bill let alone pay it. However, the credit card issuer gives a grace period, generally three weeks, in which you can decide which of the three options you want to follow.
- Pay the minimum and you have almost double the purchase price and would keep paying for the same amount for a longer period.
- Pay a little more than the minimum and you would pay for the same amount for a shorter period.
- Pay in full by the due date and you start the next month with a clean slate.
Credit cards can be a highly convenient way to avoid carrying around large amount of cash in your pocket. When you charge, you are actually and in reality borrowing and renting money. The interest, if you cannot pay the bill in full, is ferociously expensive and way high.
If you have credit card debt right now, and millions of Americans do, don’t beat yourself up. Your goal is to do what you can to try and pay that balance off as soon as possible.
If you cannot pay the full amount, pay at least $50 more than the minimum so that eventually you would pay the debt and in a shorter period of time. Do your own calculation. If you increase the payment to $100 beyond the minimum, you would pay off the debt in half the time.
In the meantime, here are a few other things you should know about credit cards to make sure you are using them wisely:
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Don’t be late
If you are late on any of your bills, many credit card companies, still in the fine print, reserve the right to increase your interest rate. The U.S. Senate has generally curtailed this practice, but it’s something to keep a close eye on.
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Stay away from “convenience checks”
When you use those “convenience checks” or take out a “cash advance” using your credit card, you often are charged a higher than normal interest rate. The interest typically starts ticking the minute you access that money. Besides, there may be other fees associated with it.
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Read the fine print to see if you qualify
When you apply for card with an attractive interest rate, a card with a different interest rate could arrive in the mail. In the fine print, it often says that the attractive rate is for qualified applicants, and you might not qualify.
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Think real hard before balance transfer
When you do a balance transfer, often the attractive interest rate that is advertised is for the transferred balance only and any new charges may have a higher interest rate on them. To add salt to injury, in these instances your monthly payments typically go to your lower interest debt first leaving that higher interest debt hanging around until the bitter end!
In a Nutshell
Remember, the best way to use a credit card is to only charge things on it that you can afford to pay off in full when the bill comes.
No matter how much you read about it and understand everything about your credit card and its policy, including the fine prints, in the final analysis, it’s your own mindset that will turn your financial life around and for the better.
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