Common credit card traps to avoid
Credit cards are something of a natural predator to the savings conscious. The temptation of what appears to be free money at a moments notice may be too much for many to bear and the next thing you know you are up to your neck in bills and stuff you didn’t really need in the first place.
Credit cards are not all bad, of course, but there are a few things anyone who uses a credit card should be aware of if they are trying to save, as well as how to escape if you are caught in one.
First of all, the minimum payment. Many card companies will allow you to service part of your debt with a minimum payment that usually covers the interests on the amount you loaned and a small amount of the principle. The trap is sprung here as it can take years to pay down your debt in this way. The way out of this bear trap is to pay as much as you can towards your credit card debt to pay as little interests in the long term.
Second, and perhaps just as nefarious, is the low introductory rate card. These are tempting to the frugal as they often offer a zero-percent introductory rate. The trap with these cards are the fees, especially balance transfer fees. It may be tempting to bounce from one zero-interest card to another to avoid paying interest but the fees will catch up with you. If you do have a card like this, pay it off as fast as you can.
Another pitfall with credit cards is a creeping APR. APR is the annual percentage rate of interest and credit card companies can increase their rates whenever they choose. If you have a credit card with a variable APR keep a close eye on the actual rate you are being charged. If it keeps increasing it may be time to transfer your balance elsewhere.
There are of course numerous pitfalls aside from the three briefly discussed here. If you are using a credit card be sure to pay down your debts as fast as possible, keep an eye on your fees and be aware of a creeping APR.
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