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Credit Cards -- What You Should Know
There are a lot of questions about using credit cards. Here's
some important points for you:
A quick look around on the Internet this morning shows that
more than 9 million people in the UK do not pay off their credit
card balances each month. (The principles of what follows are the
same in the USA, or wherever you are right now.)
The average balance left outstanding is over £1000. The
interest charged on such a balance varies according to the card,
but we have seen rates of up to 29%!
When you bear in mind that banks are offering somewhere in the
region of 3% interest on account balances, it's easy to see how
such a fantastic amount of money is turned over within the
banking and finance industry!
Consider a card with an average outstanding balance of
£1000: with an interest rate of 19%, this could take over 20
years to pay off at minimum payment levels! On a balance of
£1000 at 19% for 20 years, you'd pay back a total of
£3889.
Credit cards are a tool designed to make a profit for those
who issued them. They are not provided for your convenience! The
only way it makes sense to use a credit card is to only use it up
to a point at which you can pay the full balance each month.
In other words you are using it to access money you already
possess, and not using it as a form of loan. To use a credit card
for a loan is going to be some of the most expensive credit you
will ever encounter.
I know that life isn't always easy, and some people will say
they need to use a credit card to get by. This is the worst
position you could be in, and it is really important that you do
something about your financial circumstances if you are in this
position. Continuing along that path will steadily and inexorably
lead to financial disaster.
Nobody said it's easy! But I would be doing no service at all
if I avoided the facts, even if it's not what everybody wants to
hear.
Another unwise use for a credit card is to get a cash advance
from an ATM machine. whereas with purchases on the credit card
there is an interest-free period up until the next payment is
due, there is no such period of grace for cash withdrawals. Use a
debit card instead.
And be aware of the deal with store cards. These can typically
carry some of the highest interest rates around. Any savings are
often have wiped out by the fact that you are encouraged to buy
more then you otherwise might have, and even if they are
genuinely savings, they are typically dwarfed by the total
interest when the balance is not paid in full.
Use your credit card wisely, use it to your advantage, and get
on the right side of the credit card game.
David Andiers is the owner of RF Credit which is a premier
resource for credit information. For more information, go to:
http://www.rfcredit.com
MORE RESOURCES:
Credit - Google News
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