HOW TO BE CREDIT SMART
Here's How to Enjoy the Holiday Season Without Piling up a Mountain of Debt.
By Muyi Shogbuyi
As the holidays approach, many people are already looking forward to end the year with a bang. Party, champagne, gift-giving, travel and other purchases, many of which would be on credit.
When you buy on credit, it's very easy to overspend. Each payment may not seem like much, but when you put all the bills together, they begin to add up. Besides, the cost of credit is continuing to rise. Credit card issuers continue to increase their fees and penalties.
It's wise to be aware of some of the credit traps that may trip you and send you into a debt hole. Digging out of piles of bills may turn out to be a difficult undertaking.
Interest Rate Hike--Average interest rates on credit cards have climbed at least one percentage point in the past 12 months. Average annual fees have also risen.
Tougher Penalties--In the past, you could be 15 to 20 days late on most cards without penalty. Now it takes just being a day late on a payment for stiff penalties to be imposed. Up to $25 for late payments and $18 to $25 for going over a credit limit. Some banks even impose "punitive" interest rates as high as 30 percent on top of penalty charges.
The bottom line is if you don't use your credit responsibly, be prepared to be "punished." Banks are not taking lightly a carefree attitude towards credit.
Self-Defense--Consider the following strategies as self-defense to safeguard yourself:
* Don't give your credit card issuer any reason to penalize you. Get your payment in on time and stay within your credit limit.* Spend cash only or aim to pay your balance off in full each month. It's an interesting discipline to adopt.
* Watch out for the store credit cards. They have higher interest rates and tougher credit policies.
* If you have a high-cost card, consider transferring to a lower-rate card. There are many of them around.
* More importantly, keep your spending in check. Because when it comes to paying, you would realize that having a lot of credit is nothing to brag about.
If you're interested in a list of banks that offer lower interest rates, send $3 or 9 first-class stamps for your own copy. The list includes over 20 banks that offer rates of 7.99% to 14% annual percentage rate (APR). If your bank is charging you more than 14 % APR, consider switching to one of the banks on this list and save yourself a bundle.
Lastly, make an effort to pay more than the minimum due on your bill. Paying more than minimum helps you to accelerate your bill pay off. You also save on the interest charges.
Example: On a $1,000 balance at 17% interest rate, if you only pay the minimum due (say $15) per month, it would take you 17 years to pay off the $1,000 and your total pay-back would be $3,082.50. However, with just an additional $5 added to the $15 minimum, or $20 instead of $15, it would take you only 7 years to pay off the balance. a saving of $1,332.50 by paying more than minimum!
Staying out of debt requires some discipline on your part and the application of the above methods and techniques.
Muyi Shogbuyi is a freelance writer and a financial advisor with 20 years of experience. Ask for details about his hot-off-the-press book, GET OUT OF DEBT NOW: START A DEBT-FREE LIFE OF PROSPERITY. Learn from this guidebook very easy-to-follow steps about everything you need to know to get out of debt and stay out of debt, the easy way. Send a SASE and mention this publication to receive a free report: "Seven Ways to Clear Your Credit Card Debt Fast." Write to:
MAS ENTERPRISES P.O. Box 408023 Chicago, IL 60640 (773) 728-7117
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