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How To Avoid Credit Card Abuse
Credit cards were a wonderful invention, that have evolved over time. Let's not start this article by spending much time describing the history of credit cards, but rather to just provide a summary of what credit cards are about. "Credit cards are an easy to use financial vehicle which allows for purchases to be made (shopping), essentially on a promise to pay at a later date". This promise to pay at a later date, may however incur additional costs or expenses, through interest charges.
Credit cards are convenient, as you don't have to carry large sums of cash in order to make purchases. Credit cards have more security than cash, as anyone can use your cash, but using your credit card is more restrictive to authorized users (although credit card theft, identity theft, and unauthorized use of credit cards are becoming more prevalent than they have been in years past).
Credit card convenience extends to making purchases in stores, through the mail, over the phone, and even through the Internet. Credit cards can not only be a convenient way to make purchases, select cards can also provide some great rewards, bonuses and points to the user Rewards credit cards offer rewards, bonuses and benefits in the way of discounts, special offers, limited sweepstakes opportunities, bonus points that can be exchanged for services or products, and free merchandise. These rewards and benefits can accumulate to the credit card user, just by making purchases using their credit card (of course through using the right credit card that offers the reward/bonus/benefit).
Credit cards, stemming from their convenience, can also be a financial trap if not used wisely. The same “easy to use financial vehicle which allows for purchases to be made (shopping), essentially on a promise to pay at a later date”, has a couple of potential shortcomings. These shortcomings if not attended to, can lead to financial difficulty, and even contribute to potential financial ruin (bankruptcy).
The first shortcoming regarding using credit cards comes from the convenience or ease at which purchases can be made. With credit cards, you can make purchases on credit, without actually having the money to pay for the goods or services. If purchases are made without money to pay for them, this can lead the credit card user to overextend their ability to pay off the credit card debt. Some people refer to this scenario as credit card abuse, where the credit card user adds a lot of debt to their credit card, without the ability to pay back the debt in a reasonable time. The longer debt is outstanding and the more
difficult it is to pay back the debt, the more it can potentially affect one’s credit rating in a negative way as well as potentially make acquiring future credit more difficult. Check your credit report, to see what state your credit is in.
The second shortcoming regarding using credit cards, comes from the additional costs or expenses of using credit cards, if the full monthly outstanding balance is not paid by the due date. This is due to the interest charge, or the cost of borrowing money. Generally, credit cards carry a higher interest rate, in comparison to say a line of credit at your local bank (bear in mind that there are low interest credit cards available). If you do not pay off the full outstanding balance by the due date, you will find that you will have an interest charge added to your account, generally calculated on the full amount of the original outstanding balance.
Yes, that’s right, generally the interest charge on credit card bills is not for the difference between what you have paid and what you still owe, but rather on the full amount. For example, say your outstanding balance to be paid by your due date is $1,000 and you pay $999 by the due date, you will actually incur interest charges on the full $1,000 and not the $1 still owing.
If a credit card user has difficulty in paying their credit card debt, the addition of the monthly interest charge on the full outstanding balance will make paying off the credit card debt even more difficult.
If you pay off your credit card balance in full by the due date each month, you can avoid additional expenses (interest charges) that might contribute to financial difficulties regarding bebt repayment. By paying off your credit card balance in full by the monthly due date, you may also improve your credit rating.
To avoid credit card abuse, remember to try to follow these two important tips:
- Don’t make more purchases on your credit cards, than you are able to pay off in a reasonable time.
- Pay off the entire credit card balance each month, before the due date.
For more credit card information and online credit card applications, please visit
www.lots-of-credit-cards.com.
About the Author
John Vink edits and manages a number of web sites, including 2 financial related web sites:
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| Credit Reports - Credit Cards - Car Loans - Home Loans - Credit.com |
| Credit.com offers a variety of credit related products and services including credit reports and credit scores, credit cards, car loans, home loan and ... |
| www.credit.com |
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| Equifax Personal Solutions: Credit Reports, Credit Scores ... |
| National consumer credit reporting company that offers credit reports, FICO(R) credit scores and identity theft protection products to consumers and small ... |
| www.equifax.com |
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| The FTC's web site on Credit |
| Credit is much more than a piece of plastic, and the resources on this site can help you become a more savvy consumer. You’ll also find compliance ... |
| www.ftc.gov |
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| Federal Trade Commission - Consumer Credit Center |
| Features an assortment of helpful articles related to credit issues. |
| www.ftc.gov |
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| AnnualCreditReport |
| Site set up by the big three credit reporting agencies in the United States, to furnish free annual credit reports, as required by federal law. |
| www.annualcreditreport.com |
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| Springboard - Non-Profit Consumer Credit Management |
| Our mission is simple: To offer education on the wise use of credit. ... SPRINGBOARD has been approved to provide credit counseling services and issue ... |
| www.credit.org |
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| myFICO - FICO Credit Scores, Online Credit Reports and Identity ... |
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| Credit Suisse Global |
| Credit Suisse Group is an international financial services group. - Shares part of SMI. |
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| Experian: Free Credit Report and Credit Score, Credit Check ... |
| Credit referencing and consumer targeting for the USA and other countries. |
| www.experian.com |
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| National Credit Union Administration - Home Page |
| An independent federal agency that supervises and insures 7152 federal credit unions and insures 4240 state-chartered credit unions. |
| www.ncua.gov |
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| Credit - Wikipedia, the free encyclopedia |
| Debits and Credits, a type of bookkeeping entry; Credit (creative arts), acknowledging the ideas or ... Retrieved from "http://en.wikipedia.org/wiki/Credit" ... |
| en.wikipedia.org |
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| Credit (finance) - Wikipedia, the free encyclopedia |
| Any movement of financial capital is normally quite dependent on credit, ... Sometimes if a person has financial instability or difficulty, credit is not ... |
| en.wikipedia.org |
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| The National Foundation for Credit Counseling |
| DebtAdvice.org is a service provided by the Members of the National Foundation for Credit Counseling (NFCC), most of them known as Consumer Credit ... |
| www.nfcc.org |
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| FreeCreditReport.com | Free Credit Report and Credit Score Online ... |
| FreeCreditReport.com: Free credit reports and credit scores from Experian. Get your free credit report and credit score now. It's free, fast, and easy! |
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| Compare credit cards | apply for a credit card | 0% balance ... |
| Compare over 300 credit cards, including 0% offers and balance transfers, and make a credit card application online... |
| www.moneysupermarket.com |
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| Ford Credit - Auto financing for Ford, Lincoln and Mercury cars ... |
| Ford Credit provides auto financing to finance a lease or purchase a car or truck through Ford, Lincoln or Mercury dealerships. |
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| The Credit Card Prank |
| In my lifetime, I have made nearly 15000 credit card transactions. ... Credit card signatures are a useless mechanism designed to make you feel safe, ... |
| www.zug.com |
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| Credit magazine, corporate bonds, derivatives, structured credit ... |
| Credit magazine provides information on the international credit markets for credit investors, issuers and market professionals. |
| www.creditmag.com |
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| CUNA: The Credit Union National Association |
| News and resource directory about credit unions. |
| www.cuna.org |
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| Credit/Debt Management - Tools and Advice for Managing Credit and Debt |
| Drowning in debt? Trying to improve your credit score? This is the place for you. Get real world information and tips, as well as the legal low down, ... |
| credit.about.com |
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