Credit Card Problems Information and Tips

Money Smart - Credit Card Help

The number one cause of financial troubles for the majority of people today is probably credit cards.

Yes! Those neat looking plastic cards that are so easily available today and can let people buy stuff on a whim without paying cash up front. Buy now pay later has taken on a new meaning today. That is because when you buy now and want to pay later, you usually end up paying interest also and credit card interest can be a whopping 20 to 25 percent.

Credit card interest rates of course would depend on the credit card you use. However the average rate today can still be as high as 20 percent.

Some department store credit cards interest rates may be as high as 30 percent when you take into account their fees etc.

Interest on money you owe adds up quickly and continues to add to the debt of people who are unable to pay off their monthly credit card bills.

Suppose you have a credit card from one of the popular department stores like Sears. I looked at an application for their credit card and found that their interest rate is 28.8 percent and the minimum payment required to keep your account in good standing is the greater of:

√ $10.00 or

√ 3% of the new balance as shown on your account.

Suppose your balance after shopping for those appliances and gifts ends up at $5000. In such a case the minimum payment required would be 3 percent of 5000 or $ 150 to keep your account in good standing.

If you decide to pay the minimum amount due on your card every month, It would take you 25 years to pay off your $5000 credit card bill. You would have also paid $16,731.63 in interest. A bit scary, don't you think.

Credit Canada has excellent calculator on their website that lets you calculate your how much your credit card is costing you and how long it will take you to pay your credit card depending on the payments you can make.

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As the United States as well as other major countries in the world face an ongoing recession due to the changing economic conditions around the world. For the average family to survive today, it is common sense to watch your money and reign in spending. Purchasing on credit cards should only be considered if you can pay for the item in the very near future.

Making purchases with your credit cards intending to make only the minimum required payments is a sure way to financial problems in the future.

LIFE WITHOUT CREDIT CARDS!

credit cards in hand Credit cards can be very useful if you use them with care. In fact life without a credit card is hard to even imagine these days.

Many businesses prefer credit card payments instead of cash due to the ever increasing problem with fake currency bills. Try getting a hotel room without a credit card today. However credit cards must be used with care and diligence.

Here are some points to remember:

Shop around for the right credit card. Look for low interest rate credit cards, comparison shopping for credit cards can save you money.
Carrying too many credit cards can lead to problems. It is much easier to stick to one or two credit cards. Keeping too many credit cards can also lead to temptation to spend more.
When making purchases on your credit card, keep in mind that within a matter of day’s payment for the item you are purchasing will be due. Don’t buy items if you know you will not be able to pay for them within a reasonable time. Remember interest adds up and you don’t want to pay interest on interest.
Make maximum payments that you can afford on your credit card bills, not minimum required payments.
Make purchases wisely, avoid temptation. The item you are contemplating on buying may not be that much of a bargain if you add the credit card interest you might end up paying, so add the interest payment to the sale price in your mind.
Debt consolidation is a good alternative to manage all the high interest paying cards. However don’t go in for debt consolidation just to start charging more on credit cards when they are paid off with debt consolidation loans.

Credit Counseling - Debt Consolidating

If you find yourself in a position where you find yourself trapped in a financial mess, seek help. Many agencies offer free help and they can put you on the right track.

A word of caution here, many lenders are on the lookout for people who are having trouble with credit for the purpose of making money by talking them into taking on more debt. Paying off one loan by another loan has to be done with care and debt consolidating can be useful only if you decide to give up your credit cards and save high interest rates. The best route for those who don’t understand credit is to get counseling and professional help.