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May 8, 2013

Four Situations in Which Using a Credit Card is Not Advisable

Using a Credit CardYour credit card, while serving as a powerful tool for all your financial needs, can lead you to a world of trouble if you don’t use it the right way. Credit cardholders must avoid getting trapped in a deep hole called debt. However, they often find it hard to consider the immense amount of expenses, especially if a bank already gave them enough credit to just charge these costs. Moreover, this powerful financial tool can oftentimes be considered as the worst form of finance because of the fact that incurred debts are classified as unsecured. Also, they carry an interest rate that is higher than a home or car loan. Compared to other types of loans such as home mortgage or student loan, credit card debts are not tax deductible.

If you have a credit card, you don’t want to use it on certain things or events that could definitely spell disaster on your financial and economic standing. In fact, many experts say that you should not use it in these situations:

  • Paying for your college tuition. Using the credit card while in college is never good to begin with, because of the consequences that doing so may bring. Many college graduates have experienced dealing with credit card debt during their time at school, and their financial woes continue to pile up as they advance in age. For one, upon graduation from college, you might not be able to find a job at the soonest possible time, which would make it hard for you to earn income to pay off your credit card debt.
  • Paying for your wedding costs. In such a prolific event like a wedding, planning is a key priority. Saving for years with your soon-to-be wife or husband for the significant day is a very important way if you want it to be extra special and start your married life on the right track. However, you shouldn’t use your credit card in financing your wedding costs, as this will backfire, causing you newlyweds to deal with debt during your first few years of marriage.
  • Going on a vacation spree. If you are planning for a vacation, it is best that you save on cash money for your out-of-pocket expenses rather than using your credit card all throughout your out-of-state or out-of-country trip. Financing your trips through the use of your credit card will just create a mountain of debt upon your return.
  • Paying for your medical expenses. Dealing with the costs of your medical treatment can be very daunting, but that does not mean you should resort to using your credit card to finance them. Some health providers offer rate adjustments and payment plans that might be suitable for you.

Using your credit card is still important, but using at frequently and as a means of covering much of your finances is not good at all. Next time you encounter the abovementioned situations, think twice before dealing with your finances. Use your credit card in moderation, or suffer consequences along the way.

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March 6, 2013

Getting your head around credit card interest rates

Credit card interest rateA credit card is a form of loan, albeit one involving more flexible terms and smaller sums of money than a personal loan or a mortgage. However, like other types of loans, credit cards also have interest rates. You need to understand more about how interest rates work, and how they will affect you and your finances, before taking out a credit card.

Why interest rates can be confusing

At the moment, credit card issuers can choose one of 14 different methods for charging interest. These methods involve calculating interest in different ways. So, if you have two credit cards which seem to have the same interest rates and you use them in exactly the same way, one could cost you more because the provider has decided to use a different method to work out that interest.

APR

Another reason why interest rates are confusing is because the industry uses acronyms such as APR to talk about interest. APR (Annual Percentage Rate) is a standard way to work out the cost of credit, taking into account the interest rate and any other charges. This rate shows you how much it will cost to borrow money over the course of a year.

It should be the case that credit cards with lower APRs give you the best deal, but it doesn’t always work out that way. This is because many cards start and stop charging interest on transactions at different times. However, most lenders offer a ‘typical APR’ when advertising credit cards. This is because when you apply for a credit card, you may be offered a rate based on your credit history and personal circumstances. According to a Guardian factsheet, banks only have to offer their advertised APR or a better rate to 66% of potential customers.

When interest rates will affect you

If you pay your balance off in full every month, you probably won’t need to worry about interest rates. However, interest rates will affect you if:

You only make minimum payments off your total balance every month
You pay anything less than the full balance each month
You use your credit card to take money out of a cash machine

If you meet any of these criteria, you should be looking to find the lowest interest rates when carrying out a credit card comparison. If you do your research and take the time to work out how much a credit card will cost you in the long term, you are likely to end up with a good deal and a way of borrowing money that suits you.

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September 12, 2012

3 Important Debt Relief Tips

More and more credit card users are going in the debt each month and the common reasons are stagnant income, rise in the living cost, and unexpected life events such as the accidents, diseases, and natural calamity etc. These reasons make the survival difficult for the credit card users and they find it really difficult to come out of their debt. It may surprising to hear but it is true that debt relief will become the easiest job for you if take care to follow some important debt relief tips. Concentrate on these 3 important debt relief tips to get freedom from all the debt.

Follow the best debt relief option

There are too many debt relief options available in the market depending on the market situations in the local area. Taking a loan from the financial institutions is the first option that most of debtors try. The debtors can also sell their ownership of house, car, bike or anything else. The item you choose to sell should depend on the total amount of debt that you have to repay. The debtors can also ask for the money from some other sources such as the relatives, friends, and neighbors etc. So you have so many options of debt relief but the big question is that which option should be tried.

To get the answer of this question, the debtors should compare all the options and choose the one that is most suitable according to their requirements. Choose the best option that not only helps to pay the debts but also gives the peace of mind to the debtors.

Pay full debt each month

The credit card providers provide an option to pay the minimum debt this month and pay the rest in the next month. This is a good option of payment for those who do not have the sufficient money to pay their debts this month. Although it is a good option but it can also make the situations worst for the credit card users. The money that you will not pay this month would add to the balance in the next month. This will increase your burden in the next month and it will continue to rise whenever you will fail to pay. So the best option is to try to pay full debt each month and do not let your debt grow like a tree.

Hire a credit counselor

If you think that these 2 tips might not go a long way in giving relief from the loads of debt growing then the next important tip is to hire a credit counselor. The credit counselor will run a credit counseling program to analyze your financial situation and the debt. The credit counselors will also help in getting the concessions from the creditors on the interest rates. So this is how the counselors can be helpful in reducing the debt.

These are the three important tips that will help any debtor to get freedom from the debt.

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September 2, 2012

10 Healthy Ways To Build Credit

Building your credit is not easy and should be a task that is not taken lightly. There are many different ways to build credit and you should be aware of which ways are effective and which ways are not. No one really knows the formula that the credit bureaus use to come up with a person’s credit score but there is enough knowledge that the financial professionals have created some tips for building credit.

This rest of this article will give you some simple tips of how to build your credit. Of course if your credit is clean improving your score will take no time at all. However if your credit score is in the poor category improving will take some time.

Get A Secured Credit Card

If you have a bad credit rating or no credit at all an unsecured credit card may be difficult to receive. This is where a secured credit care may come in handy. Even though these cards are secured with your own money they are still reported to the credit bureaus so if you use the card correctly and continue to pay your score will rise.

Have A Cosigner For A Loan

Another way to establish credit if you have bad credit or no credit at all is by applying and receiving personal loans for bad credit with a cosigner. A cosigner is someone who will sign on the loan and will be responsible for the loan in the case of you defaulting on the loan. As long as the payments are made on time and you follow the terms of the loan your credit score will improve.

Check Your Credit Reports

This is probably an obvious tip but if you are aware of where you are currently standing when it comes to your credit score you will know what it will take to build better credit.

Open A Personal Bank Account

Often times a personal bank account is overlooked. This is because the bank does not report to the credit bureaus. However if you keep your account in good standing and have a good history with your bank it will be easy to get instant payday loans through the bank that will offer a good interest rate.

Understand Your Credit Score

What this means is that you need to know how your credit scores are formulated. Once you know that you will be able to do what needs to be done to build your credit history. You will know if you need to get a credit card to help raise your score or a personal loan of some sort.

Keep Your Credit Cards Open

If you are trying to build your credit closing your credit card accounts will decrease your credit score. It is important to know that even if you are not using your credit card just having it on your credit file will increase your credit score. However it is best to use your credit cards but keep the balance on them low.

Pay Your Bills

Believe it or not if you do not pay your monthly bills even your utility bills can ruin your credit history. These will be reported to the credit bureaus if you default.

Do Not Apply For Loans or Credit Cards

This is a pretty obvious tip. If you do not need a loan or a credit card do not apply for one? Every time you apply for one of these forms of credit it will lower your score.

Cut Up Your Credit Cards

Rather than close out your credit card accounts to keep yourself from using them it is a better idea to cut them up. By not having the access to them the account will stay open but will have a balance of nothing on them because you will not be using the card.

Use Your Credit Responsibly

Using your credit responsibility is the best tip of them all. If you keep your credit cards with a low balance on them you will find that your credit score will continue to rise. By not using any of the credit that you have could actually hurt you.

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May 22, 2012

Is Credit Card Insurance All It’s Cracked Up to Be?

“The ability to pay your debt is important for your financial security. However, what happens if you are not able to make your payments? Succumbing to a disability could put you out of work for a long period of time. Your property could be destroyed in a bad storm before you finish paying for it. Credit card insurance could be something worth looking into.

Credit Card Life Insurance

If you die, your credit balance will be paid off. This can help relieve your family of at least one of your debts upon your passing. Without insurance, your family will be asked to pay your debt for you. You should be aware that you may already be covered if you already have life insurance through another provider. Therefore, it may not be worth carrying.

Credit Card Disability Insurance

Those who become disabled will have their current balance paid off. Keep in mind that future purchases will not be covered under this policy. Also, you will need to carry a policy for any of the credit cards that you currently have. However, this may be a good policy to have if you are really concerned about your credit score.

Credit Card Property Damage Insurance

Items that are damaged or stolen will generally be covered under the terms of this type of policy. The downside to this coverage is that many different policies offer this coverage as well. Your homeowners policy will cover the cost of anything damaged or stolen from your property. Renters insurance will generally cover this type of damage if you rent an apartment. Avoid this extra coverage if at all possible.

Other Pitfalls Of Credit Card Insurance

There are a a few other pitfalls of credit card insurance policies. The biggest pitfall is that there are many exclusions. You really have to read the fine print before agreeing to a credit card insurance policy. Another pitfall is that you are almost conned into buying a policy. One common tactic is to offer you a free 30-day trial. However, it is very difficult to cancel the policy after the trial is over.

Do yourself a favour by avoiding credit card insurance if at all possible. There are plenty of other policies that will offer you the same coverage for less. Purchasing a life insurance policy should cover your credit card debt as well as other debts you leave behind. Private medical insurance should help you cover your bills if you are ever out of work due to a medical issue. In other words, there is already coverage available to you if you are ever sick or injured. Go with that instead.

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