Traps With Credit Cards

The Late Payment Trap

When you are late with a payment your statement is going to reflect the penalty charged for that issue. First you will notice that all credit card statements are going to make it clear when the payment must be in and the methods of payment you can use to ensure that payment is made on time. You will find that the fine will vary between credit card companies, but it is typically 20 to 25 pounds. If you are behind on payments you will also have the information transmitted to the credit reporting agencies and lenders will see your credit history is less than sterling. There is an easy remedy to keep your payments from being late. The credit card companies have established a direct debit payment system that allows you to set the payment amount and payment date up for the entire time you have the card. This means you don’t have to keep the date in your head. Keep in mind that the payment balance could change as you use the card, so you should monitor the automatic debits from your account to make sure you are not over extending yourself. You also need to have the money in there before the payment is set to come out.

The Minimum Payment Trap

When you have a credit card and can’t pay off the entire balance you may elect to pay the minimum payment do. This is a trap for the credit card company to earn more money off of your payments. In other words as the balance continues you are going to be making interest payments on that balance. The minimum payment is usually 3% or 5 pounds depending on which is more. When you pay the minimum payment generally you will find that only a third of that amount is going towards the credit card balance. You should pay a higher amount than the minimum payment to ensure you are paying the balance down if you can’t pay it off.

The Cash Trap

Never think of credit cards as a substitute for cash. Credit cards are not debit cards. You are going to pay a fee for any money you withdrawal using the credit card at an atm. You will also find yourself paying back that amount you have withdrawn. This means you are going to a higher amount for getting a little cash with your credit card. This is the same if you use credit cheques. The credit cheques debit the amount off of your credit limit, which means a high fee and of course the fact that you have to pay that amount back.

The Store Card Trap

The store card is issued by a retail store to extend you a line of credit while you shop with them. Of course it is a credit card, which means there are monthly payments, a balance, and often higher interest that you will need to pay back, especially if you don’t pay the entire balance before the due date.