Credit Cards Can Be A Dangerously Quick Way To Accumulate Debt

Category: Finance, Credit.

Credit cards can be a dangerously quick way to accumulate debt. Mundane activities such as renting a car or starting dealings with a new bank all require you to show your credit card.

At the same time, they are nigh- indispensable in today s economy. A credit card proves your financial solvency. If you have a high credit limit, you can charge payments to your card without having to always have cash with you, and without worrying about overdraft fees from your bank. In some ways, it s also practical. Moreover, if something comes up, you always have a ready source of temporary money. If you have a low credit rating, you ll have trouble finding a good credit card offer.

Unfortunately, how you pay off your credit cards affects what kinds of credit cards you can get. The high annual percentage rates( APRs) on the few cards that people with low credit scores do qualify for, only make it harder for the people to pay them on time, causing people s scores to go even lower. Using them carefully can make your credit rating go up. Such is the paradox of credit cards: they re necessary, yet they re easy to misuse. At the same time, not being frugal and not reading the fine print can cause you to run up a huge, high- interest debt. What should you do if your credit rating is abysmally low and you receive a credit card offer? Then, your bills and, one day expenses are just too high, or you lose your job, and you just can t make that minimum payment: your credit rating plummets.

Oddly enough, the answer is often to take up that offer. Get ready to see annual percentage rates approaching 20% or even 24% . Of course, the credit cards you re going to be offered once your credit goes down won t seem as tempting as before. Or, you ll see cards offering comparatively low APRs, such as 10% (this figure will start to seem low to you) . Yes, all those fees are different. Then, you ll be bombarded with additional fees, for anything from account setup, to participating in the credit program, to having to pay an annual fee just to maintain the card.

All in all, you may pay up to$ 200 a year in fees for the privilege of owning a credit card. Although it s painful to own these credit cards, they can be one of the fastest ways to raise your credit rating. Why should you accept such terrible bargains? Psychologically, they can be a big help when it comes to learning to cultivate frugality. Nowadays, there are even credit cards that reward consumers for using the cards to make purchases and paying their bills on time. You won t be tempted to up a run big bill, because you know the interest rate on that bill is going to be obscenely high. Those deals used to be offered only to those with credit scores on the upper end of the FICO scale, but the recent credit crisis has caused many lenders to change their business strategy.

The best advice here is to do a lot of research, before you get a credit card targeted at those with low credit. Plus, many credit cards let consumers pay their bills online, making on- time bill payment easier than before if you are lazy about sitting down and going through paperwork. Then, focus on making small purchases and paying off all your bills.

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