Some Consequences Of Poor Credit Card Use
July 22, 2008 · Print This Article
More people than ever before are regularly using credit cards. Most actually have more than one card that they use to make daily purchases. Society is overwhelmingly consumer-driven. This has necessitated at least some type of credit card use to make certain purchases or to buy from online outlets. What makes this trend troubling is that with increased credit card use there is consequent epidemic of debt. This is largely due to the widespread ignorance among many cardholders of proper use and management of cards.
There are some definite consequences of poor credit card use. At this time, it might be beneficial to examine a few reasons why this has become so commonplace. Take a look at the following common mistakes and see if you can do something to prevent serious debt from poor card use.
Making a late payment. Although it should be obvious, many people simply do not pay their credit card bills on time. More than this, it is not an isolated occurrence. Rather, this has become a normal pattern or practice. Making consistent late payments adversely affect your credit rating and will cost you extra money in late payment charges. Also, your credit card’s interest rate may increase as well.
Just paying the minimum payment. This is not as obvious to some cardholders. They set aside just enough to pay the minimum required payment on their credit card balance month after month, but soon realize that they are spending more on paying for the interest rather than the principal of the balance. In to make reasonable progress, you will have to pay more than the minimum so that a portion of the principal is paid on as well as the regular percentage of interest. This is the only way to keep your debt down and deal with current debt issues.
Using your credit card to buy essential items. It can become a habit very quickly once you have a new credit card to use it to make even insignificant purchases. You might begin paying your utility bills with the card, or using it to pay for dinner, or get groceries. This is not a proper use for your credit card. In fact, it is a easy way to accumulate enormous debt if you do not monitor your spending. Consistent use in these areas without setting limits has led to many cardholders’ growing levels of debt. You can begin a pattern of living beyond your means that may leave you under a crippling amount of debt.
Impulsive spending. With a ready source of funds like a credit card on hand it is easy to let your desires for instant gratification get the best of you. Cardholders begin to make impulse buys without any thought to the consequences of uncontrolled spending. Debt accumulates with little notice – at least not until you get the next bill in the mail.
Cash advances and withdrawals. Cardholders who have access to such features as ATM service or cash advances may use them without discretion. This is becoming a common mistake that can have serious financial consequences since there are higher interest rates on fees assessed each time the features are used. The rate will be retained until the balance on this charge is paid in full. These types of card features are better reserved for emergency purposes only.
Poor credit card use is an out of control problem with many consumers and the results have been devastating in some cases. Debt abounds and many fail to realize the best way to deal with it is to avoid it all together and use their credit cards reasonably.
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[...] Some Consequences Of Poor Credit Card Use [...]
[...] Some Consequences Of Poor Credit Card Use [...]
[...] are many ways to improperly use credit cards that can allow the situation to spiral out of control very quickly. One of the main things to keep [...]
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the only reason they drop is inquires, you're getting denied is a totally different thing. first of all 740 is an awesome score. what you really need to do is wait. you need to let your credit age a bit. besides credit score and on time payments, creditors look at established credit and the only way to get that is to let those trade lines age.
Cards with low limits lower your score because it shows that someone doesn't trust you with much debt. Get rid of both of the two 500s.
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i love mythbusters the best show on tv =)
I totally understand you wanting to pay cash for everything you buy, and not wanting to have any loans or credit cards, but you've got to understand that credit is a game, you just have to learn how to play it.
These unsecured cards are the only thing that's going to help you rebuild your credit. Even more, in most cases, than getting negative marks removed from your credit report.
I took my credit score from 580 to over 700 in under 6 months by doing two things, disputing negative marks on my credit report, and getting these merchandise cards.
See what you've got to understand is that the biggest mistake average people make with their credit, is that they pay everything off in full every month. In order for your credit score to steadily rise, you've got to keep a 10 to 30% debt to credit ratio on all unsecured debt, i.e. store cards, credit cards, and merchandise cards.
You determine your "high credit limit" by simply adding up the credit limits on all those cards or unsecured debt, and simply have balances that add up to 10-30% ratio of your high credit limit.
For example let's say you have three credit cards with a $5,000 limit each, so you'd have a $15,000 high credit limit. So you'd need to have a balance from these three cards of at least $1500 to get, and keep that 10% debt to credit ratio, and of course like I mentioned you could keep a higher balance than that, as long as that ratio never exceeds 30% you will certainly see your credit score rise consistently.
Now the problem for most people with bad or problem credit is that they simply can't get approved for regular credit cards, so they must get these merchandise cards instead. The key here is that a merchandise card and a "regular" credit card report and are considered the same on your credit report. So the credit limit on the merchandise care gets counted as part of that high credit limit we talked about earlier.
So for example: Joe wants to raise his credit score. He currently has two credit cards that have $2,000 limits on both. So currently his high credit limit is $4,000. But he has maxed out both of them. So his debt to credit ratio is 100%…not good.
So what does he do? He gets several merchandise cards. One with a limit of $10,000 and two more for $5,000 each. So now, Joe's high credit limit has suddenly gone up to $24,000. Now considering Joe doesn't abuse his merchandise cards and only uses $1,000 between the three of them, he now has $5,000 in debt to his available $24,000 which gives him the debt to credit ratio of about 21%. Which as we talked about, is between the 10-30% range.
Now Joe will continue to make the minimum payments on all his cards in order to show a good payment history, and this will allow his credit score to quickly and consistently rise.
This example can be done the exact same way if you're starting with no cards or no high credit limit at all.
Also, check out the credit secrets bible at the website I've listed in the source section of my answer here. I don't make any money if you buy one, or whatever, it just really helped me get ahead in the credit game, and change my life as far as credit goes. I tell all my friends and family that have credit problems about it.
Hope this helps,
Matthew
Most student cards are made for those with little or no credit history. Discover and Chase have some great student cards that you can see at the link in the source below.
Also, depending on why you want a credit card – you could always get a prepaid credit card. These are good for people who want to make online purchases but don't have a card or for those who can't get a card due to bad or no credit history.
Again, I would try for a student card first if that's what you want. If that doesn't work, take a look at your prepaid card options to build up your credit.
Space out the applications at least 3 months, 6 might be better. While each application will cause a hard credit pull which will ding your credit, too many within a short period will take a big bite out of your score.
can you buy this app, without filling out those long forms?
Nice research (not really since it is an article written by a reporter and not the legislation itself). So the key words here (again chosen by a reporter) are: “could” and “likely.” You still have not proven your assertion. Is this all it takes to convince you?
I agree with you…^^ this is indeed informative,,,anyways thanks for sharing!
Wow, there are heaps. Great info!
You are a genius. I really liked this price matching technique. Thanks for sharing.
We watched this in my Economics class. this is was RIDICULOUS
Offering Personal Loans, Credit Cards For The Credit Impaired.
I'm sure there are companies out there that will issue you a card, but it's not a good idea at all. If you have a credit card just buy a few dollars on credit each month and pay it off when the bill comes. It won't take long to build pretty good credit.
Loan sharks…lol…
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I would call the banks and ask them if they can transfer your account to a "no fee" option. Sometimes they will do that. The no fee accounts don't have points, rewards or stuff like that. But the transfer will be considered a continuation of your existing account, so you won't get a ding on your FICO score.
Otherwise, if they won't, close them anyway. The risk to your fico score is too little to pay hundreds of dollars in fees.
If I knew then, what I know now, I would have never ever gotten a credit card to begin with!
Last friday night yeah we maxed our credit cards and got kicked out of the bar so we hit the boulevard….
Article by at 2010-09-02 17:47:01
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