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Credit Cards - The Basics You Need to Know

Feb 4, 2008
Are you one of those people who only ever got a credit card for the convenience of being able to pay without cash, or because you weren't aware of any other easy way to borrow money? The credit card industry is so competitive that, whatever card you have, the chances are that somewhere out there is one that would be cheaper or better for you and you can change as often as you want!

According to Herald Tribune for 2008 the President of European Central Bank Jean Claude Trichet told that another interest rate increase is possible because of inflation concerns. At the same time Ben Bernanke, the U.S Federal Reserve chairman, mentioned that he is ready to cut U.S rates so that he prevents a recession. He mentioned that all this downturn in the housing and credit markets in the U.S pose high risks to economy, therefore the consumer spending will slow down in 2008. Trichet said that he prefers to keep price stability. The Bank of England ignoring politicians, kept its interest rate at 5.5% in order to make easier the slowing growth.

Use the word debt as often as you can whenever you talk about credit cards.When you need money in an emergency and you just don't have any, there's no doubting that credit cards can be useful. There are a lot of good reasons to be scared of credit cards, and not to have too many.

Whatever you do, though, don't spend a whole day applying for every credit card you can find, just to see if anyone will take you. If you had bad credit, you couldn't get a credit card at all. If you directly ask why you haven't been accepted, then they usually have to tell you.

In the West, though, the art of saving seems to be a lost one almost no-one is saving enough for their retirement, and banks are having to offer ever-higher interest rates to get people to put money anywhere near a savings account. According to a previous year report from the UK's payments association Apacs revealed that the amounts of money being spent via credit cards around the country increased three times between 1996 and 2006. Credit cards are there to put you in debt and keep you in debt.

If you're a good customer, you'd be surprised how easy it is to get a better rate.

Far more people get buried in debt because they lose their job, or get sick they take out credit cards to pay for basic expenses, and fall into the interest trap. You just have to remember that any money you've saved hasn't really been saved at all. Even though you're already paying them interest, many credit cards still charge you an annual fee.

Going over your credit limit will result in your card no longer being accepted, and you being charged an over-limit fee. Borrowing a lot before you start paying anything back will make you look like a very bad risk, and so will going all the way up to (or even over) your limit on a credit card.

A minimum payment is the absolute lowest amount you can pay back to the credit card company each month you should pay more, but you don't have to. You can negotiate your debts, and pay back much less than you owe as long as they get their debt plus interest in the end, no-one is expecting you to pay the full amount when you just can't afford to.

This is one of the biggest things you need to understand about credit card debt: the longer you have it for, the bigger the problem it gets. Go back fifty years and consumer debt figures were absurdly low, the same way they are today in most of the non-Western world.

They'd rather hear from you if you're having trouble, so don't bury your head in the sand. Paying late is a big mistake for an awful lot of reasons. If you don't pay your minimum, they'll come after you but don't make the mistake of thinking it's just fine to only ever pay that much.

There are an awful lot of symptoms that can be caused by stress. Almost everyone who has debts is stressed about them. Stress caused by debts is often considered to be embarrassing, or shameful.

Moving debt around between cards often affects your credit rating in an odd way. If you write them a letter and pay a very small fee, they have to send you the full credit report that they have about you.

Almost no cards have a grace period on cash advances or credit card cheques, however. Check that the card you're looking at has a grace period on purchases.

If you haven't tried debt consolidation or negotiation, you really should. Yes, you'll have to pay back your debts eventually, but surely that's better than bankruptcy, isn't it? If you do take a debt consolidation loan, you need to read the small print as if your life depended on it (it does), and then be very, very careful.

The most dangerous thing about debt consolidation loans is that the ones with lower payments generally last a very long time you could be paying it off for twenty years, or even longer.

In some countries, you might not have a legal leg to stand on your card issuer can do what they like to you. When it comes to Credit Card Issuers, getting it in writing also means that you can hold them to what they say later on.

Credit card lenders realized, though, that they could set the minimum payments lower, and collect a smaller amount of money each month for a much longer period of time. If you can't see where their profit is coming from, be suspicious it's probably all a big scam that's going to cost you money, even if you don't realise it.

If you used half your savings to pay off that debt, you'd be in such a better position that it's really amazing. Write down a list of every debt you have, how much it is, and what the interest rate is. You might have trouble finding this information, but it's worth getting it all together in one place and write it down. You can't manage your situation strategically if you don't even know it, can you?

If the advice you get is to sign up for another loan from one company in particular, don't believe it the chances are that the person you're talking to is just a salesman in disguise. With more unscrupulous companies, you will often be charged an annual fee, an application fee, and any other fee they can think of, all of which are added to your debt.

Credit unions are like banks, only more local.

You probably don't think about it, but using a credit card basically makes your money worth less than it would be usually. That's why it feels so hard to pay a credit card back if you borrow a dollar from a credit card at 15% interest, sit on it for five years, and then give it back, guess what?

Anytime they offer you anything, it's because they're going to make a profit on it. Using credit cards is a great way of losing a percentage of your income to a credit card company in exchange for nothing. The moment you run a balance, you're paying them interest. Not only that, but you're paying your credit card bill as soon as you get your wages, so you don't have the chance to earn any interest on them from your bank. When you think about it, you're losing out twice over and for what?

Don't worry if you don't understand all the maths involved here with credit card interest rates; it's been deliberately designed by mathematicians and marketers to be as confusing as possible, to stop you working out what a bad deal you're getting. After all, if you haven't read this, would you really ever turn down a month off paying your bills? Be Always Aware of The Damage to Your Credit Report. Apply for a Less Prestigious Card. Make sure you keep track: make a mark on the calendar.

Yes, it feels better to save. Saving feels like building a foundation for your future, while paying off debt feels like throwing your money down a hole. That money is for the kids' education, or for improving your house, or whatever else and it's in an account earning a good rate of interest. What could be wrong with that?
About the Author
The tips in this article were extracted from Chris's award- winning lensite. His lensite offers best information and reviews for Credit Cards Debt Consolidation and financial resources information.
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