When you receive your monthly statements there is a great temptation to pay only the minimum due. Do not do it. Please review your statement and look for information on how soon you can pay off the account balance. If you only pay the least possible payment, it may take years, even decades, to finish repaying. It is advisable to always pay your balance off every month or try to pay more than the minimum amount. This will help to establish a good credit rating, a score that financial institutions use to determine the rate you pay on your loan.
Real life examples:
Imagine that you are 18 years old and spent $1,500 on clothes and DVDs with your credit card interest rate of 19%.
If you pay just the minimum amount each month, and as a minimum equal to 4% of your outstanding balance (the lowest amount allowed by certain issuers), your down payment will be $60.To pay off the debt it will have more than 26 years. That equals 106 payments, and you will accrue over an additional $889 in interest. These numbers provided are true only if you do not buy anything else with the card and there are no other fees (e.g., late charges).
If the lowest payment is based on 2.5% of the outstanding balance, your payment will be $37.50. When you settle the debt it will be more than 35 years. That equals 208 payments, and have paid more than $2,138 in interest even if it did not charge anything to the account or other fees are charged.
Wondering how long it takes to pay off your debt? Depending on the information you provide, the payment calculator credit card helps you determine how long you settle the balance of your credit card.
Keep the use of your credit cards under control:
Whether you shop online, by phone or by mail, credit cards provide a hassle free option. However, when using credit cards it’s important to keep track of your expenses. Impulsive and unplanned purchases add up. When the bill comes, pay the balance. Owing more than you can repay can damage your credit rating. Keep track of your transactions can avoid many headaches, particularly if there are errors on your monthly statement. If you detect a problem, report it immediately to the card issuer company. Usually, the instructions on how to dispute charges it’s on your monthly account statement. If you use your credit card to shop online, by phone or by mail, keep copies and printouts with details of the transactions.
These details needs to include the name, address and telephone number of the company; the date when you made your order; a copy of the order form sent to the company or a list of existing codes of the items requested; the order confirmation code; advertising or catalog which you made the order from (if applicable); any applicable warranties; and refund and return policies.
If you use a credit card, department store charge card or debit card, take the following safety measures:
• Never lend it to anyone.
• Never sign blank receipts. Draw lines in the blanks of receipts above the total so the amount cannot be altered.
• Never put your account number on the exterior of an envelope or on a postcard.
• Always use caution when disclosing your account number over the phone unless you know that the person you are talking to is the representative of a reputable company.
• Carry only the cards you plan to use to minimize damage in case of loss or theft potential.
• Always notify the loss or theft of credit cards, charge cards and debit cards to the corresponding issuers as soon as possible. Afterwards, send a letter that includes your account number, the date noticed your card was missing and the date of the loss was reported.
For more information, you can consult the guide of the Federal Reserve Consumer Credit Card Guide
Follow these guidelines to prevent the going into debt and create a good credit rating.
• Know your means and your financial limits and do not exceed them. Charge only the items that you know you can afford each month.
• If you already have an accumulated balance, pay more than the minimum payment (or as much as you can afford) to reduce your principal balance. Try to keep the balance as low as possible.
• Find and compare before accepting a credit card offer.
• Compare the APR. They may range from 7.99% to 30.25%.
• Use only 1 or 2 major credit cards and avoid using your entire credit limit.
• Read the fine print and disclosures.
• If you are in a situation where you are making payments with several credit cards, attempt to consolidate them into a single card with a low APR. Or, alternatively, you should first pay off the card with the highest interest rate.
Here are a few problems related to credit cards to avoid:
• Balance transfer fees:
A charge of 3% is quite common to transfer the balance, typically for a lower interest rate. Per $1,000 will cost you $30. Transfer $10,000 and could pay $300. There is a cap. Even with a cap, you might pay $75 or more. Decide if it’s worth transferring funds and paying a fee to get a lower rate. Otherwise, you might lose money.
• Late fees:
The late fees can amount to $39. Some cards have a sliding scale, and anything over $1,000 balance, you are charged the highest amount.
• Annual fees:
These charges can be up to $500, for reward programs. But many cards are advertised with no annual fees to distract you from other important details. Choose a card with a fee structure that suits your circumstances.
• Transaction fees:
These fees can amount to 5% for cash advances. Want to quickly get $100 in an ATM? Be careful with the minimum charge of $10. Read the agreement. And remember, advances usually include a higher interest rate.
• Surcharge for being over the limit:
It may amount to $39. Here and there is often a sliding scale.
• Travel Penalty:
If you make purchases outside the United States, the credit card company could add a fee for currency exchange of 1%. Some credit unions and banks add an additional 2 percent. Know Before You Go.
• Why is it important to read the fine print?
Penalty fees alone are an average of $113 a year for each American family, but the jumps in the interest rate can cost thousands of dollars over the years.
Please share your comments below on how to avoid credit card fees: