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CREDIT CARDS

Credit cards come in a plethora of range, choices, and types. There is probably one credit card waiting for you for every kind of expenditure – a card to pay loans, a card to pay grocery, a card to pay car bills, a card for educational expenses, and a card to pay other cards. With the wide currency of credit cards, debt has become popular as well. And debt traps too. Over a trillion of dollars is spent by Americans annually, and half of it is to be repaid.

CREDIT CARD CALCULATOR: PAYMENTS

Paying the minimum over long periods of time results in paying heavy interest. It is wrong to assume that when you make payments, they are first used to deduct the principal and then the interest. A major part of the payment goes in clearing the interest first. For example, on a balance of $1000 at 15% annual rate, and a minimum of 2% payment, after one year of payment, your outstanding balance would be $900! So you have only paid a mere $100 toward your balance, and not $240 if the whole amount had gone toward clearing the balance first. This gives more time period for the company to charge you interest on. Sticking to the minimum is not therefore advisable.

THE UNSECURED CREDIT CARDS

Unsecured credit cards are not guaranteed with any backing bank balance. You repay the expenditure at the end of the month, and avoid any interest charges. Or carry forward the balance for the next month and start paying interest on it as per the agreed APR rates. These cards are the ones in demand and you may need a good credit report to back your claim for a low interest rate card.

Often introductory cards are given at 0% interest rate. This offer is meant only for a specific period, say one year, after which all your balance is charged at normal rates. Check with your card issuer if the balance remaining at the expiry of the period is charged for interest from the date of purchase that fell within the free period, or from the beginning of the normal rate period.

The real problem with these cards arises when you fail to make the payment, or delay it, by the end of the month. Then the introductory offer could be withdrawn and full interest charges applied.

THE SECURED CARDS

These are great if you do not wish to withdraw more than your bank allows you to. There must be minimum bank balance to get these cards. Often these are used to repair a bad credit report. There are often a good amount of fees, charges, miscellaneous deductions associated with these cards, especially those meant to repair bad credit. Check all the charges and then go for them.

Learn more about bad debt cards.

OTHER CREDIT CARD TYPES

There are many other types of credit cards – store credit cards, affinity cards, business cards, and consolidated credit cards. Each of them offers some advantages and are associated with specific corporations.