Pros and Cons of Credit Cards
Credit cards are very convenient. There's no need to carry any cash; you can just take a credit card with you to the shop and charge for your shopping.
When you shop on the Internet or over the phone, it's the only good way to make purchases online. This is more convenient than posting a cheque for payment. Like anything convenient, though, having credit cards have its cons.
Not Keeping Track of Your Shopping Charges May Land You in Trouble.
When you walk into that shop and hand over the card, you don't pay cash rightaway. This can mean that as you do not see less money in your purse or wallet, you may lose track of how much you've spent.
Everyone has a tendency to underestimate what they spend, and smaller amounts can add up quickly on a credit card without you even noticing. It's like taking the way phone bills work and applying it to everything you buy – and that can't be a good idea.
Also, imagine the scenario if you have more than one credit card. You will have to consolidate your charges on all of them as well as those on your debit cards to derive your total spending for the month.
You May Pay More Interest than Earn Interest.
The moment you run an outstanding balance, you're paying the credit card company interest. You're also paying your credit card bill as soon as you get your wages, so you may not have the chance to earn any interest from your bank balances.
You Charge More to Your Credit Cards to Earn More Reward Points.
The more debt you show you can pay back, the more credit card companies will offer to you in terms of limit and cash advances. The offers are so attractive that sometimes, it's tempting to apply for more than one credit card. Credit card companies also try to make you charge more to credit card by awarding you reward points. The result is that you end up spending more as you get enticed by lucky draws, discounts for shopping, etc.
But Credit Cards If Used Wisely Can Be Useful.
When you need money in an emergency and you just don't have any, there's no doubt that credit cards can be useful. They are also a very useful way of proving to credit rating agencies that you can handle debt, and this may be taken into consideration when you apply for car loans or a mortgage.
Just remember that whenever you handle credit cards, you've got to learn how to manage your finances. Keep your loans to a minimum, and you will be in greater financial health.
Credit Cards: Top 7 Mistakes that Card Holders Make
You need to manage your credit cards wisely. Otherwise, you may end up in financial trouble. Unfortunately, there are many who don't realise that they may be making huge mistakes with the use of their credit cards. Here are top 7 credit card mistakes that card holders make:
1. Paying Just the Minimum Sum.
The minimum sum is just an amount that you must pay back each month to avoid defaulting on the debt. If you pay just the minimum sum, the rest of your outstanding is subject to interest computations. Always pay back more than the minimum sum or make full payments to avoid credit card debt.
2. Making Late Payments.
If you don't set up any kind of automatic debit payment from your bank account, then it can be tempting to just put your credit card bill aside and get to it when you have time. Before you know it, a few weeks have gone by and you're late. If you leave it to the deadline, you may find that the payment won't get there quickly enough.
Paying late is a big mistake for an awful lot of reasons. You will almost certainly be charged a late payment fee, and your late payment will go on your credit report. You may also find that you lose any good rate you had or any preferential rates that you may in the future receive.
To avoid late payment, you should always post your payment a long time before the due date (at least a week). If you've left it to the last minute, phone up and try to pay that way.
3.Being deceived by Offers from Credit Card Companies.
It is never, ever worth getting a higher-interest card simply because it offers some kind of loyalty points, flight miles or whatever. Even if it offers a cash reward, it is unlikely to be more than you would pay in extra interest – after all, why would they give you free money?
4. Collecting Cards.
Some think it looks good on them to have a wallet choked full of credit cards. Especially if the wallet is packed with gold and platinum ones. But envy not! These card holders may well in a situation of having to keep track of all the different cards, balances and interest rates.
In fact, you should limit yourself to a maximum of three cards at a time. Any more starts to make you look over-committed in your credit report, and could get you turned down for a bigger loan.
5. Charging More to Earn More Points.
The credit card companies are clever in rewarding you with more bonus and loyalty points if you charge more during a promotion period or a holiday season. You may end up with shopping that you don't need just so as to earn more points. If you can well afford all your purchases, fine! But if not, you may be in for a massive headache when your bill comes!
6. Using Your Credit Limits to the Max.
Your limit is a maximum limit; not a minimum one! Whatever you do, don't get a card and immediately spend your whole limit. This looks very bad. It is better to spend about halfway regularly and pay it back.
7. Not Reading the Terms and Conditions.
Finally, as ever, don't sign anything you haven't read! I know it can be tough to read all the fine print but if you do not know what you are getting into, then you shouldn't get the card. Pay special attention to any future increases in rates, and what kind of fees you can be charged.
Easy Tips for Your Late Credit Card Payment
There are three reasons that you might have missed a payment on your credit card: either you can't afford to pay, the payment didn't get there in time or you just plain forgot. For whatever reason, there's one thing you need to do, and quickly – get on the phone.
Then, apologise like you've never apologised before. Don't panic, stay calm, but make it clear to the customer service representative that you're very sorry. Say that things like this never happen to you. If you just forgot, then tell the truth about what happened. But if you can't afford to pay, then you should say so too.
You will be surprised at how sympathetic credit card companies can be if you phone and apologise. After all, the sensible ones want to keep you paying interest to them for a long time to come, so it's not really in their interest to punish you.
Remember to show your appreciation if they let you off. Promise that it won't happen again. Whatever you do, don't get angry or frustrated. You need their goodwill and to be in their good books.
However, if deemed necessary, you may also want to show that you are willing to transfer your balance elsewhere if they won't let you off this one mistake. Credit card companies will usually be more accommodating to your request once you make this known.
You need to do everything you can to persuade them not to add your late payment to your credit report. Any negativity in your credit report may adversely affect your applications for any credit. Remember that any late payment can be a black mark against your name for as long as ten years.
On the other hand, if the worst happens and it does get onto your credit report, don't worry excessively. As long as there's only one late payment in a year or so, it doesn't matter too much. It's the people who consistently pay late who get the truly terrible credit ratings.
In the future, remember to make payments early. This goes especially for the people whose payments didn't make it in time. It is just not prudent to wait until the day before the deadline to make your credit card payment. Many things can go wrong at the last minute.
In a nutshell, it's generally a bad idea to let bills of any kind stack up until you get around to them. Review your bills regularly, pay on time and you'll live a much less stressful life.
