Much of the debt problems if origin has committed errors in the use of credit cards, and many do not notice them until the debt reaches a suffocating and unmanageable level.
It is therefore important to recognize these faults in time to avoid falling into a spiral of debt with serious consequences in the future.
The minimum payment is what you must pay each month to avoid default and be penalized with more charges. This amount varies according to the sender, but only a small percentage of the balance. For example, in many cases the minimum balance can be 2% of the total balance. This means that if your balance is $ 1,000, the minimum payment is $ 20.
The problem is that if you only pay the minimum amount, can take years to pay the balance, but not only that, you will have paid almost double interest, as these accumulate daily.
So it’s good to try to pay the balance in full each month, and if this is not possible try to pay an amount that is greater than the minimum to pay off the debt as soon as possible.
If you send monthly payments and notice that the balance of the debt does not go down but instead increases, then there may be a problem of spending beyond what your income allows you.
The situation is complicated if you pay only the minimum amount and continue making expenses. For example, you meet the minimum payment of $ 20, but charges add $ 50.
This pattern of payment and spending does nothing to increase the debt, and the best way to avoid this is through a budget.
If you need to use your credit card to get cash means you’re going through a serious liquidity problem, and perhaps have neglected to establish an emergency fund or savings.
Cash advances have higher interest cost, which can be more than 20% annually. To this we must add the rate that banks charge for access to cash, which on average is 3%.
While these developments can take you out of trouble, if not canceled immediately the amount of your debt will grow exponentially and later will be very difficult to handle.
The credit card has a credit limit, which is the maximum amount you can charge to the account. However, the bank or card issuer may allow you to overdo the limit, but you will be charged a penalty or fine for it.
This can make your credit score drop and the interest rate on your account up. Besides that the bank will continue charging a penalty every month until the excess amount is canceled.
Depending upon your cards for your daily expenses can be another sign that your expenses are exceeding your income. This will not only increase your debt levels but can affect your credit score each month unless you cancel the balance in full, it would be a good strategy to accumulate points if your card has a rewards program.
If you have a spending problem the best solution is to start reviewing your income and expenses flow and budgeting.
Something is very frustrating to receive a penalty of $ 35 for paying late, and worse if they accumulate for several months and have to pay interest on them.
There are several causes for which payments may be late, but to avoid it can establish an automatic payment method, either by the minimum amount or the entire balance.
The credit card is very useful, but if you do not handle tidily you can bring serious headaches.