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Saturday, March 25, 2017  
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Credit Cards Seem to Add to Americans’ Problems

Scott Bilker Scott Bilker is the founder of DebtSmart.com and author of the best-selling books, Talk Your Way Out of Credit Card DebtCredit Card and Debt Management, and How to be more Credit Card and Debt Smart. Receive the 5-Year Loan Spreadsheet when you subscribe to his email newsletter.

Holidays can be expensive; so can Thanksgiving and Christmas, never mind special events like birthdays and anniversaries. The problem is with such things that if they are financed with a credit card and the statement balance is not paid in full when it comes in, each of these events cost more than they should have. The high rate of interest applied to balances make bargains less so and certainly add unnecessary costs to monthly expenditure.

There is a plethora of figures on the level of credit card debt across the USA and some of it certainly appears to be out of control. Often people simply open their statements, look at the minimum the credit card company requires them to pay and fulfills that condition. Believe it or not it is easy to ignore the full total because that is not the check they are required to write at any time until they reach their credit limit when alarm bells ring.

Anyone that allows their credit card spending to get out of control should sit down, reflect and come up with a solution.

Pay in Full

You may have the resources to pay the statement balance in full though that can mean sacrificing something else. You may need to suspend payments into other accounts, emergency fund or retirement. You may even need to withdraw money from elsewhere. You need to judge the cost of repaying what you owe the credit card with the potential loss of savings, past and current.

If last year’s holiday costs have not been paid off while you are planning this year’s you are in trouble.

Priorities

You need to look at your most expensive debt and think about how best to clear it. That may be a consolidation loan, a personal loan at a lower rate of interest, which clears the problem. That is only worthwhile if you have the self-discipline and determination not to build up such debt again.

Balance Transfers

There are opportunities to transfer card debts to other cards which offer introductory promotions to attract new business. They provide a breathing space but interest rates will click in after the introductory period and you must be prepared for that and know what you are going to do.

The Current Situation

160 million Americans have credit cards; the problem is that the vast majority seem to be unaware of how best to use about them. Many use them to buy things they couldn’t otherwise afford and find they cannot settle the bill in full for several months. The high rate of interest charged at the end of each statement period if only a partial payment is made is high and frankly wasteful. Everyone should understand all the terms and conditions applying to a credit card and that includes interest rates for realistic loans  and potential penalty charges. There are plenty of things relating to cards beyond the obvious one of convenience and it is worth knowing about a few.

  • Sign-Up Bonuses. You should take advantage of any reward offers as long as there are no difficult conditions attached. You should not overspend just to get bonuses.
  • Statement Closing Date. It makes sense to have your statement date similar to your pay check so that it is the first check you write.
  • Value of the Annual Fee. You need to know what you are getting for your money. Is the card better than one where there are no costs involved?
  • Check whether you can get any fees waived. You should recognize that you are valuable to your credit card company, especially if you use your card regularly. That being the case it may be possible to negotiate a better deal, even the waiving of some fees.
  • Double check when you are rejected that they won’t reconsider if it is important to you. You may get a surprise rejection. If your credit score is reasonable you should not be rejected by anyone. If it is important to you to get a particular card there is nothing wrong in getting in touch again to reaffirm your case.
  • Buy at the right time. Those who really know how to use their cards can get the maximum credit by buying at the beginning of a statement cycle rather than at the end.

Credit Cards aren’t necessarily bad news but there is a definite minority of Americans using them properly.

This entry was posted in Balance Transfers, Consolidation, Credit Cards. Bookmark the permalink. Read more articles by Scott Bilker. (Also see articles by all authors and articles in all categories.)



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