Tag Archives: credit card

6 Easy Money Saving Tips Any Student Can Use

20 Apr

Jim Wang, Wallet Hacks
wallethacks.com

College is a fantastic time of exploration, freedom, and growth.

It’s also a time when many of our habits are formed, especially those about money and saving. These habits can have a ripple effect on your life so solidifying a few good practices today can help you better manage the future.

I have a list of 40+ money tips for college students, which cover the basics like emergency funds and budgeting, but today I wanted to share an extra set of just money saving tips every college student needs.6 Easy Money Saving Tips

Avoid credit card debt at all costs

It’s so easy to charge everything to plastic. Whether it’s textbooks, equipment, or a pizza, make sure that you pay off your credit card bill in full each month.

It’s so tempting to pay the minimum and push the debt off another month, but that will result in you paying hundreds of dollars (if not more!) in interest for nothing. If you don’t believe me, you can use this calculator to do the math yourself and find out how much that $20 pizza will cost you!

That’s money you can use to save for your retirement, for a new car, or your first house. Avoiding debt, especially high interest credit card debt, is priority number one after graduation.

Start budgeting

Budgeting isn’t the most fun thing to do but getting in the habit early is a good idea. When you budget, you have a better sense of where your money is going.

You can use tools like Mint or Personal Capital to help automate the process and when you’re older, you’ll appreciate the wealth of historic information you’re recording now.

Cook more, eat out less

Your studies and your social activities will probably take up a big chunk of your time, so you’ll be tempted to eat out more than you cook if you’re not on a university meal plan.

Resist the temptation! Eating at a restaurant, even a quick service one, is far more expensive than cooking at home. In the beginning, you’ll be terrible at it. Everyone is.

But stick with it and try to cook as much as you can. It’s healthier, cheaper, and you’ll get better the more often you do it.

Take advantage of student discounts

Businesses give student discounts all the time. They know that students don’t make a lot of money and they still want your business, so they’re willing to give you a break if they know you’re a student.

Always keep your student ID on you and ask if a student discount is available – you might be pleasantly surprised.

Use your student loan for tuition only!

Some student loans are deposited directly into your student account and some are deposited directly into your bank account. If you have one of the latter, do not use the money for anything other than tuition and school related expenses.

If you have no other choice, you can use it on necessities but your goal should be to avoid debt as much as possible. Sometimes you don’t have any other options, and that’s understandable, but make sure before you saddle yourself with student debt.

Earn a little cash in your spare time

We all have downtime during the day and on weekends – try to find a way to turn that time into money.

Whether it’s taking on a side gig, earning some cash online through surveys, or something bigger – building a side hustle that earns a little extra money can pay dividends in the long run. There are a lot of sites online that will pay you money for small segments of work, or gigs, and you can easily finish them in 5-15 minutes of down time.

Jim Wang writes about money on his personal finance blog, Wallet Hacks. Get his strategies and tactics for getting ahead financially and in life by joining his free newsletter.

 

America Saves Week: Pay Off High Interest Debt

3 Mar

In 2012, 71 percent of students who graduated 4-year colleges took out student loans. Debt isn’t fun, but education is one of the better reasons to take on debt. While you may not enjoy paying back student loans there are some steps you can take to save yourself some money and make your payments hurt a little bit less.

ASW high interest debt TXT.jpg

  1. Prioritize high-interest debt: While Federal Direct student loans are capped at 6.8%, private loans are not. Even worse interest rates? Credit cards. If you have credit card debt, prioritize paying it off before your student loans. 6.8% interest is no fun, but credit card interest rates 20% and higher can be crippling.
  2. Income based repayment: If you qualify for an income-based repayment (IBR) plan, do yourself a favor and apply for one. Generally if your debt is higher than your income you will probably qualify. Even if you are able to make your payments without much issue, an IBR can still save you money. How you may ask? If you keep paying the same amount you did before, you can target your payments toward either your highest interest or smallest loans depending on which repayment style fits you. Not to mention, if you are one of the approximately 50% of people who work in public service, you can qualify for loan forgiveness after 10 years.

Pick your payoff: There are two main methods for paying off debt when you have multiple balances to pay. The snowball and the avalanche method.

The snowball method entails taking the extra money you have and paying off your smallest debts first while paying the minimum on the rest. Then once that is taken care of, you roll that payment into the next smallest and knock off your obligations one-by-one. This is best for those who like the reward of seeing their different loans disappear the quickest and can help you stay on track easier.

The avalanche method is similar to the snowball where you make minimum payments on all loans but one. The difference is that you target the highest interest rates first. While you may not experience the visual rewards of seeing the small debts disappear quicker, you will save the most amount of money in the long run this way.

One way to not repay is by spreading out the extra you pay to all debts and pay a little bit additional on everything each month. This provides neither of the advantages that the avalanche and snowball method have while still costing you the same amount. You get less savings than the avalanche, and less of the reward that the snowball offers.

Becoming Credit-Wise: What Students (and You!) Should Know

5 Dec

Note: The following article was written for Financial Aid administrators, but has information that is useful to anyone looking to learn about credit.

By Jeff Hanson, Director of Borrower Education Services, Access Group Published by the National Association of Student Financial Aid Administrators (NASFAA)

becoming credit wise.jpg
As a financial aid administrator, you know your students need to understand their student loans and manage their spending well. Understanding how credit works is an essential part of that, especially for students who must supplement their federal loans with private, credit-based loans.But do your students— and you—really know enough to be truly “credit-wise”? Students may know the basics, such as having the highest credit score possible will help them get credit at an affordable price. But do they know what it takes to get a high credit score (say 800 or more)? And that most students probably score far below this number? Do they know that their credit score can impact the cost of credit, their ability to obtain other financial products such as auto insurance, or their employability? And what happens when they miss a payment or start accumulating credit card debt—how much can this lower their score? Students should never underestimate the value of good credit. Those who need private education loans, as increasing numbers of students do, will find that their credit history is likely to affect their ability to obtain the needed funds, and can even affect the cost of their loans. The better the student’s credit, the greater the probability that he or she will get the loan, and the lower the cost of that loan. Good credit does count! Building up a good credit history comes from understanding how credit reporting and credit scoring work, and from practicing sound financial habits.

Credit Reports

A credit report is a summary of the information contained in an individual’s credit history, which creditors use to evaluate the likelihood that the individual will repay future loans. A credit history is generated from credit account information and payment records that creditors have reported to authorized credit reporting agencies, so anyone who has at least one credit card, a consumer loan (such as a car loan), student loans, or any other form of personal credit should have a credit history with an authorized credit reporting agency (see the list at the end of the article). In essence, credit reports provide a sense of an individual’s willingness to repay a loan, based on his or her past credit performance. Students can think of their credit report as their “credit transcript.” Whether students think they have credit problems or not, it’s a good practice for them to review their credit reports from each of the three national credit reporting agencies at least once a year to be certain that all reported information is accurate. In fact, the Fair and Accurate Credit Transactions Act of 2003, Pub. L. 108-159, 117 Stat. 1952 (FACT Act) entitles all consumers to obtain a free copy of their credit report upon request from each of the three agencies once every 12 months. More information about obtaining these free reports is available from the Annual Credit Report Request Service at www.annualcreditreport.com or by calling 887-322-8228.

Credit Scores

If the credit report is the credit transcript, the credit score is the “credit GPA,” and just as with grades, the higher the better. The credit score is a numerical value based on credit account information in a person’s credit report that focuses on individual borrower behavior. Unlike the credit history, which consists of raw data, credit scores are measures of future credit risk based on an assessment of that raw data. Credit scoring is a quick, accurate, consistent, and objective method that helps lenders’ quantify how well individuals have managed their credit. The higher the credit score, the greater the statistical likelihood that an individual will repay a future loan on time. Credit scoring was first developed by Fair Isaac Corporation, which created the credit scores used most widely by the credit industry and are often referred to as FICO® scores. Credit scores are calculated using a statistically derived mathematical formula that provides a numeric prediction of credit risk. The formula itself, which is proprietary, was developed by examining the credit reports of millions of people at two points in time (typically 24 months apart).

Factors Affecting Credit Scores

Paying your credit card bills on time each month has the greatest affect on your credit score. However, contrary to popular belief, a flawless payment history is not sufficient for good credit. A number of factors impact your credit score, including:

  • promptness in paying bills;
  • total debt;
  • amount owed on all credit card accounts;
  • age of credit accounts;
  • number of credit card accounts including number of credit inquiries;
  • the proportion of credit card balances to total available credit card limit;
  • number of credit card accounts opened in past 12 months;
  • number of finance accounts; and
  • occurrence of negative factors such as serious delinquency, derogatory public records, past due accounts that have been turned over to collection agencies, bankruptcies, student loan defaults, and foreclosures.

FICO® scores assess all such negative factors in three ways by evaluating:

  • how recently they occurred,
  • their severity, and
  • their frequency.

The more recent the occurrence, the farther the score will drop. The larger the balance affected (severity), the farther the score will drop. And the more frequently such negatives appear on one’s credit history, the farther the score will drop. Two factors that warrant further review are credit inquiries and student loan debt:

Credit Inquiries

Requests for your credit record can also affect your credit score. Only “hard” inquiries made during the past 12 months, however, have a potential negative affect on your score. Hard inquiries are those made by creditors when you apply for a loan or a new credit card. In such cases, you must give permission for your report to be “pulled” (provided to the creditor). All other credit inquiries are “soft” inquiries and are not a factor in scoring. Soft inquiries include:

  • Self inquiries—your requests for a copy of your own credit report or credit score;
  • Promotional inquiries—those made by companies wanting to offer you an opportunity to apply for credit;
  • Administrative inquiries — inquiries made by your current creditors who want to monitor your credit activities, as well as inquiries from the credit-reporting agency that’s maintaining your credit history (this typically occurs when you have disputed an item that’s contained on your credit report); and
  • Inquiries from prospective employers— although they have the right to obtain your credit report with your permission, these inquiries are not for the purpose of obtaining new credit and so do not impact your score.

Student Loan Debt

Student loan debt affects credit scores, but it does not necessarily result in a low credit score unless the borrower has a “thin” credit file. A “thin” file is one that contains three or fewer “trade lines” (credit cards, car loans, etc.). These files are more susceptible to lower scores because they contain less positive information to offset any negative impact of increases in student loan debt. (Note that the majority of Access Group private loan borrowers have more than three trade lines.) As installment debt, student loans typically are viewed more favorably than revolving debt (credit card debt) in credit scoring. However, although increasing installment balances (for example, because of additional student loans) can have a negative impact on credit score, as students advance from year to year in their program of study, payment delinquencies and increasing credit card debt appear to have the greatest negative impact.

Weighing the Factors

The factors affecting credit scores are not equally weighted in the scoring process. As Fair Isaac reports at www.myFICO.com, payment history has more impact—about 35% of the score—than the other factors. Thus, making payments by the due date is very important. Missed payments, one or more delinquent accounts, and serious derogatory items such as student loan defaults, bankruptcy, charge-offs of accounts, etc., can have a significant negative impact on the score. The amount of debt, especially credit card debt, is the next most significant factor, typically accounting for about 30% of the score. Total debt is important, particularly the percentage of revolving credit (credit cards) being used. Utilization is the amount of credit card debt you have as a percentage of your total available credit card limit. The smaller a person’s credit utilization rate, the less likely it is to have a negative affect on the person’s FICO® score. Thus, it is important to keep credit card balances low, since lower is better. But this does not mean credit cards should not be used once in a while. In fact, some minimal use of credit cards can be beneficial to establish a positive payment history. This does not require the accumulation of credit card debt, however. Rather, simply using a credit card occasionally each month for small purchases and paying the credit card bill in full each time will achieve this goal. The other three factors—length of history as measured by the age of your oldest credit account, new credit as measured by the number of new accounts opened and the number of “hard” inquiries made within the past 12 months, and account mix (relative proportion of installment accounts, revolving accounts, finance accounts, etc.) generally have a lesser impact on scoring, but cannot be ignored when managing your credit.

What’s the Score?

Although there are no well-established statistics regarding the average credit scores of college students, 60% of all consumers with established credit histories have FICO® scores above 700 (using a scale of 300 to 850) according to Fair Isaac. Scores above 700 generally are considered to be “good,” and scores above 775 are viewed as “very good” to “excellent” by most lenders. It is possible to estimate what the credit score might be for a typical student. Fair Isaac Corporation and www.Bankrate.com have joined forces to offer an online FICO® Score Estimator, which provides a credit score range, rather than a specific score, at no cost to consumers at www.bankrate.com/finance/credit/what-is-a-fico-score.aspx. Using the basic Fair Isaac methodology, it provides an estimate based on the answers to a brief series of questions about credit use and payment behavior. We used the FICO® Score Estimator to predict likely credit scores for a typical third-year undergraduate, who has both education loans and credit cards, using four scenarios. For the first scenario, this hypothetical student’s credit characteristics are as shown in the table at left.

  1. “No payments missed” scenario. The estimated FICO® credit score range for this individual is 715-765. Lenders would probably consider this person to have a “good” history, and although they might not offer their best interest rate, they are unlikely to deny credit based solely on this credit score. Of course, before extending credit, the lender might also require the borrower to meet a minimum income threshold or provide loan collateral.
  2. “Missed payments” scenario. What happens if the hypothetical student’s credit characteristics change? In this second scenario, suppose the student suddenly becomes delinquent on an account and is 30 days late in making the payment. Assuming this is the only change, the estimated score range drops to 620-670. This would represent an average drop of 90 points, and the borrower’s credit would now be considered only “fair.” The individual would be more likely to have trouble getting some forms of credit, such as a private student loan, on his or her own signature. If credit were granted, it probably would be at a higher interest rate and have other restrictions and/or costs.
  3. Higher credit use scenario. By contrast, suppose the record showed greater utilization of credit cards. Starting from the original “no-payments- missed” scenario, suppose in this third scenario that the amount of credit card debt was at 50% of the available credit limit. The estimated score range drops to 645-695—a “fair” credit rating. This is better than the missed payment scenario, but would still cause an average drop of 70 points in the score from the original scenario. If credit card utilization increases to 90% (credit cards are nearly “maxed out”), the estimated score range drops to 620-670—the same impact as a 30-day delinquency.
  4. Both 30-day delinquency and 90% utilization scenario. If this hypothetical student had both a 30-day delinquency and was at 90% utilization of credit cards, the estimated score range falls to 565-615. This would create serious credit issues for the student and would make it very difficult to obtain most kinds of credit. Thus, two simple missteps— missing a payment and maxing out credit cards—could take our hypothetical student from having good credit to a situation where credit (particularly private education loans) might be very difficult to obtain and much more expensive.

Obtaining Your Credit Score

The easiest way to obtain your FICO® credit score is to go to the Fair Isaac consumer Web site at www.myFICO.com. From this site you can request your FICO® credit scores calculated by the three national credit reporting agencies—Equifax, Experian, and TransUnion—and can purchase your FICO® credit score from one, two, or all three of these agencies.

You will receive an explanation of the score, a copy of the credit report that was used to generate that score, and an explanation of the positive and negative factors that are affecting your score. Be aware that your credit score may vary from agency to agency, because the information on your credit report at each agency may differ. More information about credit scores and the scoring process can be found at www.myFICO.com. In addition, the Federal Trade Commission provides consumer information about credit scoring at www.ftc.gov.

Good Credit Really Counts!

To sum up, to get the credit needed, when it’s needed, at an affordable cost, it is essential to understand credit reporting and credit scoring. But knowledge alone is not enough. Being creditwise also requires practicing good habits. The credit tips listed below provide a framework for practicing those good habits and can help students avoid the types of pitfalls illustrated in the hypothetical credit score scenarios presented here. This will help them avoid the frustrations, anxieties, and fears associated with credit problems.

Tips for Maintaining Good Credit

You can use the following tips to help students develop and maintain a strong credit record; one that should allow them to borrow the funds they will need to fulfill their educational dreams and successfully achieve their other long-term goals. In fact, many of these tips probably are good ideas for everyone, not just for students.

  1. Develop and follow an affordable monthly budget.
    Live below your means while you’re a student; learn to stretch your dollars; be thrifty.
  2. Pay all your bills on time.
    Just one late or missed payment can have a noticeable negative impact on your credit score.
  3. Notify your creditors immediately whenever your address changes.
    Typically you can provide information updates by phone or via the creditor’s Web site. But remember, it’s your responsibility to keep them informed.
  4. Minimize your credit card debt.
    Keep credit card balances as low as possible. Do not exceed 30% of your available credit limit.
  5. Avoid charging more on your credit cards than you can afford to repay in full each month.
    Get in the habit of using cash, not credit cards, whenever possible. Credit card debt that carries over from month to month can be very costly and may lower your credit score.
  6. Record every credit card purchase you charge just as you record every check you write.
    Tracking your charges is important so that you always know exactly how much you must repay.
  7. Limit the number of credit card accounts you maintain.
    You probably don’t need more than three major credit card accounts. Avoid opening new department/retail store charge accounts; they typically can only be used at the store that issued the card and they tend to have the highest interest rates of any credit cards.
  8. Be careful about opening new credit card accounts and closing older ones.
    It’s beneficial to have the longest possible credit history to show that you’ve maintained your credit accounts responsibly over time.
  9. Maintain accurate records of your credit accounts. 
    Keep copies of all documents relating to your credit accounts. These documents should include the application, promissory note, account terms and conditions, disbursement and disclosure statements (if applicable), and lender correspondence.
  10. Obtain a copy of your credit report from each of the three national credit-reporting agencies at least once a year and review it for accuracy.

Promptly notify the reporting agency of any errors; it can take several months to correct those errors.

Credit Resources

Credit Reporting Agencies
For more information on credit reporting or to obtain a copy of your credit report, you can contact a credit reporting agency. The three national credit reporting agencies are:

Annual Credit Report Request Service
This service was established by the three national credit reporting agencies in response to the requirements of the Fair and Accurate Credit Transactions (FACT) Act of 2003, which provides consumers with the right to obtain a free copy of their credit report from each of the three national credit reporting agencies once every 12 months. Visit www.annualcreditreport.com for more information.

Bankrate.com
For information on all aspects of credit and personal finance, visit www.bankrate.com.

Fair Isaac Corporation
For more information on credit scoring or to purchase your credit score and report, visit Fair Isaac’s consumer Web site at www.myfico.com.

Federal Trade Commission (FTC)
For help with credit reporting problems, call 877-382-4357, or visit www.ftc.gov for information and free publications about credit.

Consumer Credit Counseling Service (CCCS)
For help managing your budget or your debt, call 800-388-2227 for the CCCS office nearest you or visit the national Web site at www.nfcc.org.

Note: Contact information for the above resources is provided for information purposes only. This does not constitute an endorsement, by the author, Access Group, or NASFAA, of these entities or the information and services they provide.

Jeffrey E. Hanson is director of borrower education services for Access Group, Inc., in Wilmington, Delaware. Transcript wishes to thank Craig Watts, public affairs manager for Fair Isaac, for his assistance with this article.

Video

What Are The Factors That Affect My Credit Score? By Credit Card Insider

11 Oct

Looking for more information? Check out Credit Card Insider’s website and YouTube channel!

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How Student Loan Debt Adds Up

2 Aug

College is all fun and games until your student loans and credit card payments are due. With the cost of college rising and more students attending than ever before, it is imperative that students consider how much debt they are willing to consume to pay for their higher education. The information graphic listed below shows a national snap shot of student loan and credit card debt.

But what happens after college? Students with federal loans are going to be expected to start paying off those loans as early as 6 months after they’ve graduated. Get ready and research your repayment options.

Student Loans Add Up

Infographic provided by Debt.org

 

The information graphic was provided by debt.org, America’s debt help organization. Their website is dedicated to educating students and parents on how to get out of debt.

Students and Credit Cards: How to Know if a Lender is Safe

9 Jan

There are so many things to be afraid of when it comes to getting a credit card as a student. Creditors are known to prey on incoming college freshmen by mailing pre-approved cards. Unsuspecting students may assume that these cards provide the regular benefits of typical credit cards. Others have never taken out a line of credit and don’t yet understand the ins and outs of paying the money back in a timely manner.

There is no problem with college students taking out lines of credit. Expenses that come up during college are sometimes unexpected. It’s good to have a credit card around in case you need access to money in an emergency. It’s also a good idea to start building up a good credit score early-on and taking out a student credit card is a great way to do that.

Pen signing a paper

Pen signing a paper

The overwhelming problem with student credit cards often has to do with the lender. Many ‘deals’ proposed to student borrowers are shady and designed to mislead students into signing up for cards and making purchases that they are not prepared to handle.

These cards often come with easy spending deals that look great on the surface but quickly change to extremely high interest rates, where the students end up paying much more than they originally borrowed for the purchase. Or worse, they end up not being able to pay the sum back altogether, ruining their credit, and possibly getting the bill sent to collections. If this happens, the credit card companies simply write the cost off in their taxes, while the students deal with a huge scar on their credit report for up to seven years.

That’s why it’s important to make sure to sign up for a credit card that has the student’s best interests in mind.

The card should have no hidden fees and a reasonable interest rate. It should also have a very low credit limit, so students cannot continue to borrow into the thousands of dollars.

An example of this type of card is the SAFE Credit Union Student VISA Card. Here are some of the benefits, which are great things to look for in any student card:

This card offers a maximum $500 credit limit, which is very modest and an appropriate amount for a first card.

There is no annual fee.

A parent or guardian can be required to co-sign for the card, offering the student further protection.

Students can still apply and become approved, even without a credit history.

There is a 25-day grace period after all purchases.

There is no fee for cash withdrawals if done through SAFE online banking or ATMs.

You can bank with the program and use the credit card as a form of overdraft protection.

There are built in safeguards against unauthorized transactions, in case a card gets stolen or hacked.

You can compare credit cards online here.

Stella Walker is a writer for creditscore.net and an avid researcher of credit and insurance news. She is especially passionate about protecting consumers from credit card scams and helping students protect good credit standing.

When Should I Start Paying Off Debt?

3 Dec

College is a time when students worry less about incurring debt and more about learning and enjoying new-found freedom. But as graduation nears, you’ll have to test the debts you’ve taken on during school.

Getting out from underneath debt

Graduate carrying heavy debt load

If you’re like most students, you’ll have thousands of dollars in student loan debt. You might also have some credit card debt or a car loan to pay off. Becoming debt-free is made even more challenging because you may not yet be settled in a permanent job or career. Just remember that countless other new graduates are in the same place. While many young adults go about debt payment in less-than-ideal ways, this is your opportunity to get out of debt, develop good financial habits and possibly even save money along the way.

Plan of Attack

Before you start repaying your debts, go over what types of debts you have and find out when payments will be due. If you have credit card debts, you probably already know that you have to start making payments immediately.

Student loan lenders understand that graduates often need time to find jobs and begin earning a steady income. Because of this, there’s almost always a grace period, a time of about six to nine months between your graduation date and the date your first payment is due. Even during the grace period, however, you may still be responsible for paying interest charges. Check the details of your loan to find out when you’ll be responsible for paying interest.

Once you understand the bills you face, you’ll be better prepared to create a plan of attack.  Decide how much money you can afford to put toward paying down your debts. You’ll need to cover at least the minimum payments each month on your debts. If you haven’t found a job yet, are using savings to pay down debts or are borrowing from your parents, it’s usually best to keep your focus on the minimum payment.

Paying Down Debt

Paying down debt

counting money

Reevaluate these payments after you begin earning an income. Once you have a job, make it a goal to start making significant progress on your debts rather than just paying the minimum amounts. It’s helpful to keep in mind that for each month you stay in debt, it actually costs you more money by accruing interest. So if you make larger payments each month, you’ll get out of debt faster and save more money in interest.

You’ll need to once again reevaluate your monthly payments after the grace period ends on your student loans. Having this additional financial responsibility will usurp some of your monthly funds, taking away from your ability to pay down your other debts like an auto loan and credit card debts.

Even so, if you still have credit card debt, this should be your top priority; credit cards usually come with inordinately high interest rates, so this type of debt will end up costing you a much higher percentage of your original loan. Until you have credit card debt under control, pay just the minimum on your student loans and divide any extra money toward reducing your credit card bill.

Again, reevaluate your monthly payments if there are any changes in your finances. You’ll have to adjust your budget, for example, if you finish paying off your credit card debt, earn a promotion or receive a raise.

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Katherine Pilnick writes and blogs about issues touching on personal financial well-being and issues that influence it for Debt.org, America’s Debt Help Organization.

5 Ways Credit Cards Manipulate You Into More Debt

26 Nov

Katherine Pilnick writes and blogs about issues touching on personal financial well-being and issues that influence it for Debt.org, America’s Debt Help Organization.

Of all the financial advice anyone with a credit card can give you, maybe the most likely thing you would hear again and again is, “Beware of the special offers.” People are inherently trusting and seeking acceptance. But that’s one of the things you need to be most cautious about when you are dealing with credit cards. They are like vultures. They prey on the behaviors and patterns of the weak, and how many of us won’t use something like credit when it is offered to us? Take this financial advice and be wary of these 5 ways in which credit cards manipulate you into greater chasms of debt:

credit cards

credit cards

1.) Introductory Interest Rates: Oftentimes providers will start their duplicity at the beginning of your relationship. By offering you “introductory 0% interest rates for six months,” you may think that you can just keep spending and those purchases won’t charge you any interest rates. That is true — for the period of six months. If you pay off your balance in full in 179 days or less, you have won. You are not charged any interest. If, however you don’t pay for your purchases by the time the introductory period is up, then in some cases you will pay for all the interest compounded since Day 1. It’s a tricky thing and something you should look over when they first mail you those really tiny print notices.

2.) Promotional Offer Rates: Another thing that credit cards may do that you have to watch out for is offering you promotional offer rates — say for all purchases made between Thanksgiving and New Year’s, you will pay very low interest rates. However if these balances are not settled in full, again, you could be on the hook for the amount due. Just because there was no interest over that time period, you need to be wise to the terms of the agreement or you could be on the hook for the thing.

mountain of debt

mountain credit card mountain

3.) Loyalty Programs: A third reason to reach out for deeper financial advice is when credit cards begin offering you loyalty programs. Because you are a “preferred customer,” they will entice you to want to spend more by dangling offers in your face that you just can’t say no to. Maybe they will offer you some “rewards bucks” or allow you “special offer days.” Whatever the offer is, these loyalty programs are just interested in getting you to spend more money than you want to.

4.) Shopping Days Bonuses: Another way that credit providers lull you into economic submission is through their special programs offering “shopping days bonuses!” If they want you to use their credit card, say, on Black Friday or the weekend after Thanksgiving, the credit providers can offer you special incentives to spend more over that time period and in return you will get some silly little trinket. Even when credit providers offer substantive rewards, it is usually only because their customers have spent sizable amounts of money.

5.) Extension of Credit: A final reason to cry for financial advice is when a credit provider offers you, as a regular, on-time paying credit card customer, more credit. Extending more credit, particularly to those waylaid by maxed out cards already, is dubious for sure. People who have reached their credit limit may feel as though they need to take a step back and settle their debts. But when a credit card says, “No, it’s OK. Here, take more!” they are deliberately making the easily victimized, victims themselves.

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