Debt Help

How to Use Your Credit Cards Wisely and Save Money

Think about your where you had your most expensive debts ever: Yes, you all got them from your credit cards. There’s just something tempting about getting any of those cards and before you know it, you have already been charged at least 12% interest rate of all expenses that you have incurred for the month. Here are some credit card debt facts that you might want to take note of before applying for another one, and save money in reducing your debts.

Not all credit cards offer 0% annual fee. There are credit card companies that charge annual rates upon subscription, and that is true whether you have used your credit card or not. You might be surprised when a billing statement arrives in your house and that annoying annual fee is all that you owe even if you have not used their service. Beware of these credit card companies and always ask whether they have this kind of procedure before you enroll in them.

Opt for credit card plans that offer lower interest rates. If you have a habit of carrying over your debts from one month to another, (which is not a very good habit if getting out of debt is your action plan), make sure that your credit cards are those that charge about 9-12% interest rate compared to those that can come as high as 12-15%. Remember that interest charges come with the actual purchases that you have made, so don’t make those interest fees swell even more with buying more than what you really need.

Choose a credit card company that offers a longer grace period. A grace period is the maximum number of days that you can use to give you time to pay your bills without getting any penalty. Longer grace periods mean that you have greater chances of making enough money to settle your accounts, thus giving you more time in eliminating debt more easily.

Use cash whenever you can. The reason is obvious—you don’t get to be charged any interest rate for that purchase. While credit cards give you cash advances and freebies upon enrolling in their promos, it won’t be long for you to realize that you would actually have to pay for higher bills than you usually do because of availing that service when you don’t have to.

Lastly, remember the golden rule in shopping: Ask before you pick. True, there are sale items that you really can’t put down, but ask yourself first if you really need them. You can save more money during shopping if you bring a list of what you really need to buy.  Stick to that list, keep that budget record and see how much you could actually have saved had you not been an impulsive buyer these past few years.  Sale racks can be very useful if they have the items that you have marked in your list.  Credit cards can be a very handy companion if you get to settle your bills on time so that you won’t have to face any interest rate charges for your monthly purchases. But if you are low on budget and you are trying to save money, use your credit cards sparingly to avoid further penalties and interest charges.  I hope these simple credit card debt facts are able to help you to get out of debt.

Frequently Asked Debt Questions

When you’re in debt, one of the biggest things you may want is to have some debt questions answered. You’re not really sure what exactly is going on, but what you do know is that you want to understand it all. Here are a few debt questions that people ask and the answers to go with them to try and make it easier for you.

1. What is debt? Debt is you owing money to a certain credit collector. To get into debt, you need to take out loans (using a credit card is taking out a loan) and then be unable to pay it back on time. Any money you owe is that debt.
2. What are the risks of debt? Continuous debt. Think of it like this…If you’re in debt, you’re going to have the issue of interest on top of that debt. So, if your monthly payment is $200 and you pay $25 a month in interest, if you don’t pay all $225, you’re going to keep money tacking on that will just keep you in debt longer.
3. How do I get out of debt? Getting out of debt is not the hardest thing in the world. I have written 6 Tips for Reducing Your Debt. Get in contact with your creditor or a debt consultant and explain what’s going on. They want their money back and will do whatever they can to try and make it easier on you if it means their money is coming back to them.
4. How do I make a budget? I cover this question in my article, How To Make A Budget.  In short, add up all of your income, subtract all of your expenses, and pay debt and have a little bit of entertainment with the rest.
5. What is considered “bad debt?” Many people consider consumer debt (car loans, signature loans, credit cards) as bad debt.  Most people do not put mortgages in this category, though having your house fully paid off is probably a very nice feeling.  Student loans can be bad debt, depending on how much student loan debt you have.  If it’s enabling you to get a better paying job, then it helped.  Just make sure to use the extra money you’re earning to pay off the student loans.

Those are some debt questions that are often asked. Believe it or not, a lot of people don’t know what debt is. They aren’t exactly sure if it’s certain credits or everything or nothing. And, people don’t realize just how risky it is to owe money. The bank can take your house if you’re not paying your mortgage on time. Know what debt is and then ensure you don’t let it control you. That’s where your success will come in.  Feel free to ask to get answers to any of your other debt questions.

How Interest Rates Work

When people hear the words ‘interest rates,’ the only thing that hits their head is how to decrease interest rates.  However, before you can decrease interest rates, you need to understand exactly how interest works.  The trick to interest is reading the fine print and trying to determine whether that loan has a fixed interest or a fluctuating interest.  Here’s how interest works:

• Whatever money you owe, if you have an APR of – arbitrarily speaking – 19%, that means that on whatever you owe, at the end of the year, you will have to pay back 19% of the total bill.  But, interest is collected monthly.  So, it’s dangerous because you’re paying SO much interest on a monthly payment that could be high already.  That’s how people get so caught up in debt.
• If your interest was 0% when you signed up for the credit card, the second that you miss a payment in full, interest might completely jump to a phenomenal number.  That’s the way credit cards make their money.  They’re banking on your failure to come true to your debt.  That’s why it’s so important NOT to get in debt.
• You can argue and try to decrease interest rates, especially with credit card companies, because they do want your business.  So, if you’re confident that you can continue to pay, call them up and say “9% doesn’t do it for me, drop me to 7%.”  If they want to keep you, they’ll do it.  They can afford to do it.  They can’t afford to lose you.

Interest is a tricky game.  Interest is tacked on and continues to be tacked on to whatever debt you have which is why it’s so hard to get OUT of debt.  But, if you work hard on it and really focus on it, getting out of debt does not need to be an impossible task.  It really can be as easy as cutting up your credit card and paying large chunks of money a month.  I hope this clears up how interest rates work.