| |
| |
|
Credit Information |
|
|
|
Credit Cards
Credit cards are a form of unsecured credit. The issuer isextending you a line of credit, usually tacking on all sorts of little surprises in the fine print. This type of credit is probably the most commonly used. If you have a great credit rating, you're probably bombarded with offers of new cards. They usually carry no annual fees, the interest rates are reasonable (as far as credit cards go), you get close to a month's grace period and there might be some fetching initial offers, such as no interest for 6 months on balance transfers and new purchasers. Others of us who are not so lucky, might have to pay $20 or more a year for a card, the interest rates will be higher and the come-ons less enticing or non-existent. Grace periods may be as short as 20 days and you might have to make sure you payment is received early enough so the credit card company will consider it paid on time. Still others might not be able to get anything other than a secured credit card, one where you make a deposit first and then are allowed to charge to the extent of the deposit. This kind of card, while expensive, can be helpful in rebuilding credit if you have had credit problems. Then there are cards like the original American Express or Diner's Club cards, where you're expected to pay the entire bill every month as it comes due. This kind of card forces you to be more careful with your spending, although it is becoming more frequent for a line of credit to be attached to them also, to allow you to pay for some purchases over time. Credit cards are not bad things in and of themselves, but can become bad things very quickly. You can charge just about anything and get to pay for it about a month later. You can take part in the many rewards programs and get points for things you would have bought anyway, like food or gasoline. This is all great if you pay off the bill every month. The problem is that if you run up your credit card debt, but only pay the minimum payment, that $300 TV you got on sale will really cost well over $1000. It can take 10 or more years to pay off a $5000 debt if you only pay the minimum each month. Most people are unlikely to want to pay off a tank off gas ten years after it was used up. If you read your monthly statements closely, you will see that the monthly minimum payment is barely enough to cover your interest due for that month. You are not making any dent in the amount you owe. So probably the best solution is to stay away from credit cards. But that probably is also not a realistic solution for most people. And credit cards are necessary for some things; for example if you want to rent a car. They can be very handy in an emergency. The only realistic solution is to charge only what you can pay off quickly. The next best choice is to pay as much more over the minimum payment due as you can afford. Or consolidate your credit card debt into a lower interest loan or line of credit, but only if you destroy all your cards and never apply for new ones. Many people made a habit of maxing out their cards and then going bankrupt. Their credit card debt would be wiped out in the bankruptcy court and they would get a "fresh start". In March 2005, the US Congress drastically changed the bankruptcy code, limiting access by individuals to Chapter 7 of the code, which was the section of the law that sharply limited repayment of debt. Credit card companies now check your credit report frequently, sometimes every month. Even if you are never late in your payments to them, they may decide you are no longer a prime customer and may raise your rate. Some of the things the banks are looking at is your use of your overall debt - if your ratio gets too high they get scared. Another event that may trigger a rate increase is a late payment to another credit card company or even to the phone or electric company. Being even one day late with a payment to any creditor may trigger up to a four times increase in your interest rate. If you're using one of the free or very low interest offers banks use to lure you to them, they will likely hike your rate as high as 29%. So, one final note about credit cards: do not ignore the little messages the banks send you either in your statement or separately. They may contain nasty surprises, like an increase in your interest rate that you can avoid by simply writing the credit card company and no longer using their card. I personally got one of those love notes, trying to raise my interest rate from about 14% to almost 24%. Needless to say, that card went into the garbage. Now more than ever, you must learn to use credit responsibly. The quick escape of bankruptcy will be harder to come by and it is just too costly over the long term to ruin your credit rating at any point in your life. A bad credit score not only affects the interest rate you will pay on credit cards, personal loans and mortgages, but also may affect your ability to get a job, rent an apartment or result in an increase in your auto insurance premiums. So take those little pieces of plastic seriously and handle them wisely. Chris Cooper is a retired attorney who is very familiar with debt, being in it too many times in his life. These articles pass on some of the knowledge he has gained striving to become debt free. He is editor-in-chief of http://www.credit-yourself.com a website devoted to debt management.
MORE RESOURCES:
Google News |
|
|
|
RELATED ARTICLES
Credit Card Shocker Have you ever looked at your credit card statement? I'm not talking about just making sure that all the transactions are correct. I'm talking about looking at the finance charges. Which Business Credit Cards with Reward are the Best? Thinking of applying for a credit card with a reward program to help you and your business? Here is a brief guide to some of the best programs on the internet.The Platinum Business Credit Card with rewards from American Express is a great offer. How did a Thief get my Name? Don't be a Victim of Identity Theft How do these people get my name? If you have a credit card, your name is sold to third parties, if you do not want this to happen, you must contact your credit card companies to inform them that you do not want your information sold. Check the privacy notice that comes with your bill. Give Yourself Credit The Beginning of the Credit Card EraIn 1951, Diners Club issued the first credit card to 200 customers who could use it at 27 restaurants in New York City. From that modest beginning, credit cards have become an indispensable part of modern life. Credit Card Traps: How To Spot Them On The Spot! They arrive in your mail - a conspicuous looking mail piece from some "official looking" bank claiming that you have been Pre-Approved for a Mastercard or VISA credit card.Of course, you don't have to have any credit. What You Need to Know About Interest Rates For all people shop around for the best rate, there are few who have taken the time to sit down and add it all up. After all, why would you bother? The answer is that understanding just how interest rates work can help you see how important small differences in rates and payment amounts can be. Credit Repair Scam - How To Avoid Being A Statistic? A good credit history is critically important for the consumer. A bad credit will prevent you from getting a business loan, owning a home, or even a job. What Is a FICO Score and How Do I Make It Work for Me? Whether or not you receive a loan and what interest rate you get on your credit card may be determined by something called a FICO score. Named for Fair, Isaac & Co. Credit Repair: How To Deal With Your Creditors If you are in danger of credit problems because you have more debts than you can handle, there are things you can do at least keep your creditors reasonably happy.First, prioritize your debts or rank them in terms of the ones that can give you the most trouble the quickest. What Is A Credit Report? Even if you have heard of a credit report, you may not know exactly what it is. If so, this credit report article is for you. Protect Yourself Against Identity Theft Identity theft is when someone uses, without permission, your personal information in order to commit any frauds or crimes. Identity theft is a felony that is becoming more and more common. Ten Steps To Building A Good Credit History Are you thinking of buying a house? Do you want to buy a new car to replace that old wreck? Trying to get insurance on you home, auto, or life? In each of these situations, what's on your credit report will determine if you can get a loan or insurance and what rates you'll have to pay.If you're trying to build or repair your credit history, you have a daunting but not impossible task in front of you. Credit Repair Myths and Facts There are no secrets to repairing your credit. Many shady credit repair agencies would love you to think the contrary. Building Your Credit History Today, credit is an indispensable part of our lives. In order to get the things you need, such as a home or a car, you have to apply for a credit. Credit Score: The Brightest Feather In Your Financial Cap Credit scores are the most important aspect that determines your financial future. Carrying a good credit score is an asset and can pave your future towards greener pastures. Understanding Your Credit Score When you apply for credit one of the first things almost all credit officers do is check your credit score. Although not all of those officers explained to us what a credit score is, we are all rated according to it and the offers we receive were all dependent on that score. Credit Card Disclosure Table - Do You Understand It All? In addition to the APR (annual percentage rate) and the finance charges, most credit cards have a number of 'fees' associated with their use. Some fees are unavoidable with a particular card (like an annual fee or a program participation fee), while others are triggered by certain circumstances. Dont Fall for Credit Repair Scams We've all seen the ads on television or in magazines, shouting, "Erase bad debt!" or "Remove negative entries from your credit report!" If you're a person suffering from a less-than-stellar credit rating, those headlines may seem like the answer to a prayer.The only problems is, those programs don't work, and to add insult to injury, you'll find yourself paying hefty fees to those companies, only to end up right where you started, or worse. Keep Your Credit History Clean - Remove A Negative Credit Record From Credit Report The three major credit bureaus, Experian, Equifax and Trans Union are similar and feature a "Credit Score", which is created from credit report data submitted to them about you.But very often your credit report includes inaccurate, wrong or incomplete information (credit records). How to Improve Your Credit Rating So you got into debt, had problems but you got yourself back on your feet through hard work and sacrifice and how are you rewarded? A Bad Credit Rating.You would be forgiven for thinking thats not fair and why did you bother sorting yourself out if your hands are still tied when it comes to applying for anything financial? There are ways to improve your credit rating and get back on track completely.
|
| Home | Site Map | |
| © 2007 |
