When choosing a credit card, it will always be important to consider all your options. You’ll want to ensure that you choose a plan where it will be less likely for you to fall into debt in the future. In order to do so, it will be helpful for you to understand what some of the problems associated with it are, and what can be done for avoiding the dangers of credit card debt.
Here, these matters will be discussed, along with some solutions for how to obtain debt relief should you ever find yourself in debt, and how debt relief companies can play a helping hand.
Understanding credit card debt and the dangers involved
Credit card debt is the money you owe on your credit card as a result of purchases or cash advances. This is no big deal, as long as you pay it off in full each month. However, if you carry a balance from month to month, you’ll introduce the potential for the creation of a problem.
With that in mind, there are several dangers involved with falling into credit card debt and some potential traps that can cause it to happen:
1) Overspending – Credit card debt often happens as a result of irresponsible spending. The owner’s spending habits get out of hand and they incur more on bills than they can afford, leading them into debt. Priorities for spending get forgotten and the cardholder gets carried away with making purchases that aren’t really needed and they can’t really afford. This trap is easy to fall into since the costs can be overlooked at first as they aren’t coming directly out of your account. However, as the debt adds up, so can stress along with it.
2) Interest adds up – Credit cards don’t come without an interest rate. They also have one of the highest interest rates around, is even more than what’s typically involved with cars or homes.
Monthly interest rates are usually based upon the average daily balance on your card and an amount that adds to that each day. This is what’s known as compound interest. The credit card company will use this to figure out how much to charge you. The charges incurred with compound interest can make it hard to pay off your credit card and keep adding to your bills as time moves on.
3) Damaging your credit score – If you fall into debt and take longer than 30 days to pay them off, you can negatively affect your payment history and your credit score will suffer.
4) Becomes harder to keep track of spending – Staying on top of your budget and knowing where you stand financially is important to ensure you stay afloat. By getting into debt with your credit card, it becomes more difficult to keep track of your money and what you’re spending your finances on.
How to obtain debt relief
If you do find yourself in debt, a credit card debt relief program can help by sometimes allowing you to pay it off for less than what you owe — but that comes with costs too.
Here is the process involved in getting help from a debt relief program:
1) Understanding the debt you’re in – The first step in getting help with debt relief will be to accept the debt you owe and to whom you owe it to. Prepare yourself by finding out how much you owe to each of your creditors, and how much you can afford to pay before contacting a company for help.
2) Knowing that different approaches may be required for different debts – Before you contact a debt relief company, it’s important to realize that the same approach might not be suitable for every type of debt. One factor that can influence this is the debt collector that’s chasing your payment.
They could be:
- The creditor you’ve incurred the debt directly with
- A debt collecting agency
- A debt buyer
Collectors from every category will work differently, but they’ll all labor to try and take as much of what you owe as possible from you. Having an idea of who it is that’s chasing you, and what they’re asking from you, can be helpful information when discussing what your options are with a debt relief company.
3) Getting on board with a program – The final step in seeking help with debt relief is to get involved with a program that’s right for you and serves your needs. The company will help you to work out a plan to help you clear off your debts and find out how much you can afford to pay. They’ll discuss matters with your creditors and work out a payment plan that will be feasible for you.
While considering whether it’s right for you, it’s important that you realize that the company will charge you based on a portion of the debt you owe. While they can ensure you pay less back to your creditor for what you owe, you’ll still need to ensure that the amount the debt relief company will charge for the service is within your budget.
Tips for choosing the right credit card
Taking into account your options when choosing a credit card may help you avoid falling into future debt. Here are some tips with regards to charges that you can incur to bear in mind while hunting for your credit card, to make sure the one you choose is right for you:
1) Annual Percentage Rate (APR) – This refers to the amount you pay each year to borrow money on the card. Make sure to compare the APR on different cards and consider choosing the cheapest one that you can find.
2) Minimum repayment – If you don’t pay off what you owe each month, you’ll have to pay back a minimum repayment fee. This is often 3% of what you owe, or £5 if what you owe amounts to less.
3) Annual fees – Some credit cards have an extra fee that’s added yearly. You’ll have the option to pay this off in full. Otherwise, you’ll incur interest on this fee.
4) Charges – Check the credit agreement for any other charges that might be included. Generally, you should expect to be charged for exceeding your credit limit, using your card while you’re abroad, and for missing payment dates.
5) Cash back – This will allow you to have cash refunded to your card when you spend a certain amount. You’ll want to check to make sure that you’re entitled to any cash back before deciding upon which card you choose. If you don’t qualify, it might be better to focus your attention on finding a deal with a better interest rate instead.
As discussed here, there are many problems that can be associated with falling into debt. Avoiding the dangers of credit card debt will always be within your best interest when deciding upon a card to choose. If you do find yourself in debt with your credit card, there are options available to help you find relief. It’s advised to seek out assistance from a debt relief company, and following the tips provided here should be of benefit to you if you ever need to do so.