Credit cards are like a magic wand, which can make your life easier. But, be careful while using it. Or else, you may fall into the vicious cycle of credit card debt. Usually, credit card seems attractive for its various features. However, you may not know the fact that using credit cards may add extra charges if not used properly.
According to the financial gurus, “it's never wise to charge more than you can actually afford. If you can't pay off your balance in full each month, you can quickly sink into debt.” So, think twice before using your credit cards for making any purchase just to earn points.
Presenting a list of worst and best charges on the credit cardto alert all consumers:
Educational costs have become expensive for many students. Using credit cards for paying tuition fees is a blunder. If you don't pay off the bills, then credit card interests start compounding annually or semi-annually. According to the experts, student loans are the most convenient way to fund the educational cost. They say, if you're struggling with college tuition fees, then seek help from an advisor or the office of the school to know about the different types of low-interest student loans, scholarships, grants etc. Sometimes, the Federal Work-Study program can be a good help too.
Mark Kantrowitz, a financial aid expert, senior vice president and publisher of Edvisors.com. said, “Colleges often pass on the transaction fees to the student, negating the value of the points. And some rewards cards specifically exclude tuition from eligibility for rewards."
Medical costs are expensive for those who’re suffering from serious health issues. However, paying the medical bills with a credit card can add up high interest, which can ruin your financial health as well.
You should have a medical insurance to avoid this type of situation. If you don’t have medical insurance, then don’t try to ease the cost with your credit cards. There are other options, which are safe. Try to visit the doctor’s office or hospital’s financial office to know if they’ve got a payment plan, which will suit you. Sometimes, a medical provider offers an elderly person to pay off the bills in installments and that too, with a low-interest rate.
David Melnyk, a financial advisor for Verus Wealth Management, LLC, in Rockledge, Fla, said, “Some hospitals may not even charge you interest. So, it's worth the time to discover your options.”
If you are thinking to pay the taxes with your credit cards, then you might be unaware of the processing fees of around 2%, that you’ll be charged by the third-party payment processing company. You’ll be charged around $3 for paying Uncle Sam with your debit card as well. Visit the official website irs.gov to know more on this subject. So, try to pay your tax bill by a check or a direct deposit instead of using your credit card. You can contact the IRS to set up a payment plan, which is a good way than acquiring high-interest charges on your plastic.
Matt Schulz, the senior industry analyst for CreditCards.com, said, "If you have a $4,000 tax bill, you could end up paying $80 or more upfront to pay with your credit card."
Vacations are relaxing and good to reduce the stress but, once you fund your trips with your credit cards, then you’ll be more stressed with the difficulties caused by credit card debts in future. Try to make a low-cost vacation if you don’t have enough money to fund an expensive trip. Camping, fishing, or visiting local areas are also good options. Try to open an account to save money to fund your dream vacation rather than racking up higher charges on your credit card. Sometimes, reward cards are beneficial for booking the trip, flights, rental cars. Make sure your card doesn’t charge a foreign transaction fee on the purchase.
Planning to host a lavish wedding party is a good idea as long as you’ve got enough savings to finance the occasion. If you don’t save to fund a high-end wedding party, then it'll be good to plan a budget wedding. It’ll be a far better idea to stay within a limit while entering into a new life without welcoming the debt trap.
Paying with a credit card is a good choice while you’re shopping online. Thus, you can safeguard your personal information and protect your account from fraud as well. On the other hand, choosing a debit card paying option is not always safe and reliable. Remember, reward cards are good for money back and to earn points on almost all online purchases. You just need to set a limit on your purchase to avoid credit card debts. Expert suggests, all online shoppers should be aware of rising identity theft, which are very common these days. You should check whether or not you’re redirecting to a https:// designation in the Web address while making the payment.
Bruce McClary, vice president of public relations and external affairs for the National Foundation for Credit Counseling, warned the online shoppers “You should also make sure you're not using a public computer or public Wi-Fi when using your credit card online."
Using a credit card is good when you’re buying pricey appliances and electronics such as washer/dryer, freezer, iPad or laptop. Not only to earn points, paying with a credit card allows you to get offer price, protection, extended warranties, and return protection. Make sure you check your card’s benefit statements.
Remember, credit card debt is an unsecured debt, which carries a much higher interest rate than secured loanssuch as a car loan or a home loan. Being a cardholder, you should be aware of all the things that can be financed with your credit card. Thus, you can even get a reward point, or redeem the point without welcoming credit card blues in future.
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