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Our first group is one of dependence on credit cards, they spend what they have and rely on “fake money” as we call it to drive themselves into debt. They rob Peter to pay Paul, as the expression goes, borrowing from one credit card to pay another. This type of behavior can and does become addicting. Using one credit card to pay another not only has the potential to double your interest rate, but can put one at risk for bankruptcy and poverty. Some even in this group will apply for as many credit cards as possible before their late payments hit Equifax. For this group, credit counseling is much needed.
Our second group is one where the use of a credit card can be a blessing. For example, if unforeseen circumstances come about such as a medical bill that needs to be paid, or any natural disaster, a credit card be a breath of fresh air to those who are not liquid enough to pay for this expense out of pocket. This is where a credit card can literally save a bank account. Word of warning, it is best to pay for any expense as a credit charge and not a cash withdrawal. If cash withdrawals are made and other “charges” are incurred at the same time, the interest on the cash withdrawal, which is around 25+%, will continue to accrue each month. For example, if you took out 300 dollars cash, and made a charge for 400, each month you will be paying against the 400 charge while the 300.00 dollars will be continually charged until latter is paid off. This happens more than you think. The author worked as a customer service rep for a large bank and we received hundreds of phone call per day of customers who were in this predicament. If you are just withdrawing cash, make sure the initial balance on the card is paid before making any other purchases.
Our last group used credit cards as a tool to help increase and better their credit. If you have low credit or even need a higher credit score a credit card is a wonderful tool that can help you achieve this. If you have the credit and can get an unsecured card then start making charges on this card and establish revolving credit , which is simply a credit balance that runs from one month to the next. When revolving credit is paid up to a year, this will help improve a credit rating. It is important for those in this group to NOT pay off debts early if you want to improve a credit score. Banks need to see a history of payments on time, not just a 90 day purchase and payoff.
Credit cards themselves do get a bad reputation from their users that are irresponsible, but in the right hands, a credit card can be a tool to increase one’s buying power by improving credit scores.
Category: Credit CardsCredit Doom or Credit Boom! was written by:Author:William TwinerAdded: Sun, 15 Apr 2007 13:59:34 -0400 This Article Has Been Read 479 times View all William Twiner's articlesAbout the Author: Need a Perfect Credit Score? Check out how to get a Perfect Credit Scoreand you may be surprised. |
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