The credit card is a good financial tool. It can be your best friend when used properly. But when used the wrong way, it can suck up your savings leaving you financially distressed in the end. Here are 4 ways the credit card becomes a financial monster.
When you don’t pay at least the minimum monthly due – on time.
Credit card companies make profits through the interest rates they charge on monthly dues and total dues. They will require you to pay at least the minimum amount due on or before the due date reflected on your monthly statement. This goes out against the purchases and cash advances you may have made using the card.
Forgetting to pay the minimum monthly due can turn the credit card into a financial monster as interest rates will begin to accumulate until you have settled payment delinquencies. You will end up paying more and more for the purchase which could have cost you lesser when you bought it in cash terms.
When you miss payments.
Late payments are totally different from missed payments. On average, late payments can fall behind a day to three to at least a week. But missed payments take longer and can generally overlap with the next billing period making the minimum amount due larger and total amount due even higher.
When you use it impulsively.
Credit cards are really tempting to use for cashless purchases. But when you use it for the sole purpose of having a shopping spree galore without even canvassing for the lowest prices and discounted items, you can actually fall short not only of funds for bills payment but also for other important things like food, clothing, and daily needs of your family, especially if you have kids.
When you max it out.
The spending power given by credit cards to their owners can be out of control. Within this is the tendency to max out the credit card of funds. Because of the relatively huge amount associated with the purchases plus the interest charges that may be imposed by the credit company, you may end up being in a really big financial dilemma. If you can’t still figure it out, you’ll be wiped out of your regular savings, other income, and you may just be paying interest rates and really not reducing the total credit you have. In turn, your credit score may suffer seriously!
Be good with your credit card and it will be good to you. Use it properly and it can actually be helpful in building a good credit reputation which can be a basis for obtaining a home loan for you to own your dream house!