Pitfalls of the Credit Industry
The credit industry if rife with pitfalls. If you have ever owned a credit card you probably already have learned this the hard way. If you have not owned a credit card previously you should definitely learn all you can about these convenient little suckers (literally) before you commit to any contract.
While not all credit cards are the same many do have similar things in common. For instance they will all charge you interest on your purchases. The only difference there is the amount of interest and how long after you make your purchase that you begin getting charged the interest.
Most people assume that they will not be charged interest for at least a month. This is called the grace period. The thing is that not all credit cards have the same length of grace period. Some companies have 15-day grace periods and others have none at all. This is the kind of thing that you need to find out before you ever make a charge on your card.
When you apply for a credit card you may be offered a lower interest rate. This "introductory rate," as it is called, is most likely only temporary. Once you have owned the card for a few months your interest rate will go up substantially. And the thing is that credit card companies can change their interest rates whenever they feel like it. Did you know that? It's true.
There is a clause in most credit card contracts that allow for the lender to up their interest rates at any time as long as they give you 15 days notice. No matter what rate is quoted in your contract they have this right.
One of the common myths people succumb to when using their credit card is the belief that paying of your balance every month is a good thing. Well, surprise, it's not. People who do not carry a balance on their cards are considered to be "deadbeats/" That's right the responsible, conscientious people are the bad guys. Creditors don't like them because by paying off their balance all of the time they are not letting the lenders make any money off of them. The interest is why they give you credit in the first place, that is their bread and butter. If you were not paying interest why would they want to bother with you?
If you are a deadbeat there is a better chance of your credit card company raising your interest rate or even eliminating your grace period. You might even begin to be charged annual fees for your card. Credit is not free after all.
Credit cards are a great tool to have at your disposal. They can help you get out of a jam quickly and easily, but don't let yourself get carried away by the convenience that they offer. Try to keep your credit card spending to a minimum and you will find in the end you are much better off.
Martin Lukac, represents, #1 Loans USA, a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more: http://www.1LoansUSA.com
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