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Credit Card Debt Management

By plrprousers | June 1, 2009

Credit card companies send offers on a daily basis in your email. Why are credit card companies so eager for your business? There are many reasons. Credit cards are not the free cash for sure. Funny enough, many customers think of them this way, and that—aha!- is how credit card companies build up money.

Credit cards have varying APRs or annual percantage rate you will notice it when you read through the fine print about credit cards. It refers to the interest rate you have to pay on your credit card charges if you did not pay your full monthly balance. When have you go for shopping last time, think about it. Are you sure that everything you bought from market you can pay for those items from your monthly paycheck? Credit card companies bank on customers who are not attentive towards their shopping. Credit card companies work on the chance that users will purchase more than they can actually afford using their credt card. When the bill comes and it can’t be paid in full, the customer pays interest on this borrowed amount, and that interest accrues daily. This money reaches directly into credit card company’s bank account. With thousands of customers falling into this plight on a monthly basis, you can see where the companies get rich quick.

But how can you avoid falling into the credit card trap? A little forethought and budget planning can help you prevent paying interest and still allow you to benefit from credit card perks.

Take mileage credit cards, for example. Many airlines offer credit cards that earn you frequent flier miles based on the amount of dollars you spend. Tempting, isn’t it? Sure.

Always remember your spending limits and do not cross them. It’s easy to check your credit card balance online or by telephone. Know when the closing date is for your monthly statement, and make sure you stay below your limit. That way you can take advantage of the bonus without digging yourself into a rut.

Speaking of the credit card rut, let’s go back to that interest thing. Is you did not pay your interest fully in a month it will also accumulate interest? Take a look at this example. You have racked up $10 in interest on your credit cards in one month, based on a balance of $100. (Assuming a interest rate of 10% monthly.) Because you leave that unpaid, the next month’s interest accrues on the new balance of $110. That means the next month you owe an additional $11! That’s a $21 total fee for your $100 in purchases. Did you really find a bargain when you bought that jacket at 20% off? Maybe not.

You can avoid credit card trap by using your card wisely when needed and keeping track of your purchasing. If you are smart enough you must know how to use credit card for your betterment.

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