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Ac Credit Card Warning
Just ask yourself: is the credit card working for you or are you working for your credit card? Most people's response to that question will depend on how they treat their "plastic friend" as credit cards are sometimes known. As many people with burned fingers will tell you, they didn't realize that things had become so bad until too late, because most credit card companies try so hard to make themselves sound like a charity. Well, take it from me, they aren't.
And this is not a hate campaign against credit cards. They have their plus points - in America if you want to rent a car, you have got to have a (major) credit card. But, consider this scenario:
You receive an offer in the post that sounds great, maybe it's a new TV or fridge. But it costs $2,000. You have a credit card with a $5,000 limit so you immediately purchase the product. Typically, here is how your repayment schedule will play out. Most credit cards charge a minimum percentage of the total balance (usually 2 percent) per month. Assuming the interest rate is 18 percent and you choose to repay the minimum amount of $40, $30 of that will go towards interest and only $10 towards the principle!
Does it sound worrying? Well, it doesn't need to be. The moral of the tale is to use the credit card very, very carefully.
Credit Cards Dos and Don'ts
There is a lot of truth in the saying that credit cards are not a substitute for not having money. Every time you use a credit card this should be the theme song playing in your mind. Moreover, you would do good to remember the following too:
Dos.
1] Always plan for the purchases that you have to have and those that you only want. You need the essentials, but you only want everything else. The ability to make a distinction might assist you plan more sensibly.
2] If you are caught up in financial difficulties, it's always a good idea to talk to the credit card supplier who might adjust your repayments. If you simply default, that only builds up a bad credit history for you and you could find yourself being denied credit in the future.
3] Unless you are experiencing an emergency, staying within your credit limits will help you a lot. If you must spend over the limit, ensure you are within manageable levels, say within 30 percent.
4] If your letterbox is chock-full of information on credit cards with more favourable offers than you are currently enjoying, you could always approach your issuer for a better deal. They want to retain you as a customer, so they will listen.
Dont's
1] Do not use your credit card to purchase household goods. It is too expensive in the long run.
2] Do not just pay the minimum amount. You will end up paying exorbitant amounts of interest. The quicker you are able to clear the debt the better.
3] Never use the credit card to purchase items you can't afford.
About the Author If you are thinking aboutswapping or applying for a Credit Card, have a look at the free advice on our website about using Credit Cards wisely.
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