Credit Card Quick

A Brief Introduction to Credit Cards

Introduction

Having a credit card is a wonderful privilege typically extended to those who have proven themselves responsible and able to pay what they owe in a timely manner. If used responsibly, a credit card can be a real financial asset. Many people are afraid of credit card debt or can’t see why having a credit card might be important. However, there are plenty of reasons why credit cards are so great.

Improving and Maintaining Your Credit Score

By using a credit card and keeping your balance paid, the issuing bank will report your activity to the major credit bureaus. Of course, they do this, whether your credit with them is good or bad, but if you keep your debt paid down, this will be reflected in your credit score. A good credit score will open the door to other opportunities, such as lower interest rates on a big purchase, loans and even a mortgage to get into that lovely home you’ve been dreaming about.

Convenience

When you’re running short of cash or just don’t have the time to run right out to the bank, credit cards offer a convenient way to make your purchases, pay your bills and even shop online. Sure, you will have to pay a small finance charge and some interest, but that’s a minor thing compared to having to go without something you need just because you’re a little short on the greenbacks. You can see to it that your bills are paid on  time by using plastic and then pay off your credit card balance in one convenient payment every month.

Emergencies

There’s nothing like an emergency to throw everything off balance. Why add insult  to injury with added cash worries? emergencies tend to creep up at the most inconvenient times, and few of us have the time to worry about having the cash on hand to handle the situation. Having a credit card is a terrific solution. You can get that repair or fly out of town or solve most any issue requiring you to spend money in a pinch quickly and easily with your credit card. So long as you keep the balance paid down, you can rely on your card to bring you financial peace of mind in the worst of emergencies.

Cash Advances

Should you have a need for cash, especially in instances where plastic just isn’t accepted, and it’s just too inconvenient to run to the bank, your credit card can often be a source for cash advances from any ATM. Many people and businesses are turning away from the use of personal checks and payday loans because they involve so much hassle,  and when cash is not right there on hand, your credit card can come to the rescue. Then you just have to make sure the balance is paid so you always have this option when you need it most.

Yes, a credit card can be a very good thing to have. Use it wisely, and it will always be there to alleviate those unexpected and inconvenient expense worries in your time of need.

The Four Easiest Ways to Plunge yourself into Debt

Credit Card Debt

There are many articles out there that teach you the importance of good credit and low credit card debt; however, this article does just the opposite. What better way to ruin your credit and get yourself in over your head in credit card debt than to follow these four, simple rules?

1. Forget about your budget – One of the easiest, most surefire ways to get yourself into deep credit card debt is to spend like you have no budget. Many individuals, with a credit card in their hand and a hefty credit card limit, are likely to overspend. This is because a credit card can quickly give individuals a false sense of wealth and security when, in reality, it is debt that they simply cannot afford to pay off. Making a budget and sticking to it is often a great, first step in reigning in your credit card purchases and keeping your mind realistic about your expenses.
2. Pay only the minimum payment – It may be incredibly tempting to pay on the minimum payment each month, but that will get your credit card debt nowhere fast. The best case scenario is paying off your credit card debt in full each month; however, if this isn’t possible, make it a point to pay more than the minimum payment so that you are paying on the principal of the loan, and not just the interest.
3. Make your payment late – Making your payment late is a great way to plunge yourself further into debt! From late payment fees and increased interest rates to a drop in your credit score, making late payments is, without a doubt, the best way to ensure that you will remain in credit card debt.
4. Take out cash advances – Cash advances are sneaky little conveniences that end up costing big in the long run. First of all, cash advances come with their own, higher interest rate than standard purchases. Second, they raise little red flags with your credit card company that you may be desperate, thereby often signaling a drop in your credit score and an increase in your credit card interest rates.

How to Keep your Credit Score Strong

Credit Score

We all need to pay close attention to our credit score these days, as a strong credit score is essential for obtaining any type of credit. Things certainly have changed in the credit sector, particularly as a result of the struggling economy and the new credit card legislation, so it certainly benefits us to find new ways to protect our credit score.

We all know that paying our debt on time, each and every month, is the number-one thing we can do to keep a strong FICO score, but there are also many other things that may hurt our credit:

• Cash Advances – Do not, under any circumstances, take out a cash advance on your credit card, unless absolutely necessary. Credit card companies see a cash advance move as a bad financial sign on your end, and will often pay close attention to the number of cash advances you take out. Many consumers wonder why in the world a creditor would offer a cash advance, given that information, but the fact of the matter is that creditors make a lot of money on cash advances, mainly due to the high fees associated with them.
• Maxed out retail cards – Your retail credit cards with high balances often send a signal that you are using your credit irresponsibly and that you may be under financial stress. In addition, most retail credit cards come with high interest rates and fees, thereby making them more difficult to pay off. The best rule of thumb, when dealing with a retail credit card, is to not purchase anything that you can’t pay off within a month or two.
• Too many new accounts – If you open too many credit card accounts at one time, or if you apply for too many credit cards, and are rejected, the credit reporting bureaus often see this as a sign of financial desperation. As a result, you may experience a hit on your credit score. If you were recently rejected for multiple cards, or if you opened more than one card within a month or two of each other, you may see a drop in your credit score, so pay close attention when opening any new accounts.

Credit Card Cash Advances: The Good, the Bad and the Ugly

Credit Card Debt

First, the good news: cash advances are a smart tool to have in your back pocket in an emergency situation. Now, the not-so-good news: cash advances come with upfront fees and high interest rates.

For example, you find yourself stranded out of town and in need of car repairs. Your short on cash and the repair shop doesn’t accept credit cards. What do you do?

If you are a credit card holder and you have access to an ATM, you may be able to use your credit card to get quick cash. Although the fees and the high interest rate are not in your favor, you recognize that the situation needs to be resolved.

In this instance, it is easy to see the advantages of using a credit card for a cash advance. However, many consumers have overused and abused credit card cash advances and have therefore found themselves in a mountain of unexpected credit card debt.

What you Need to Know:

• Cash advances have no grace period. In other words, you begin to accrue interest charges the moment you withdraw the money.
• The interest rate charged by credit card companies for cash advances is often much higher than the card holder’s interest rate for purchases. In fact, many credit card companies charge as much as 20 to 25 percent for a cash advance. Compare that with the typical 12 to 15 percent charged by most credit card companies for purchases and you can easily see how quickly the cost of cash advances can add up.
• Fees for cash advances can be outrageous, to say the least. Fees are generally calculated on a percentage of the cash advance taken (usually one to four percent), or are simply charged as a flat fee. Flat fees are not based on the amount of the cash advance and therefore remain consistent from one cash advance to the next.

It is also not uncommon for credit card companies to charge consumers both a flat fee, as well as a percentage of the cash advance taken. For example, the credit card company may choose to charge a flat fee of $10 for every cash advance, and then also charge a percentage of the cash advance itself.

• If you take a cash advance through an ATM, be prepared to also pay a fee charged by the financial institution that owns the ATM.