You don’t have to own a credit card to know they can be a debt enabler. Once you have a plastic card in your hand that can be used for borrowed money, it is tempting to overspend – and most card holders do just that. It’s easy to accumulate a balance and not pay it back in full each billing cycle.
In fact, this is what the credit card companies count on to make their money. It’s not all bad, it is simply a way of business that is a reality in the world of credit. You are given the privilege of borrowing the creditor’s money in turn for a small fee for paying it back over time.
As long as you make significant payments in a fair amount of time – and you have a reasonably low interest rate – you can keep out of trouble. However, many card holders fail to see all of the other costs that are associated with carrying a balance for a long time.
Additional Credit Card Charges
Over Limit Fee: When you spend more than your creditor has allowed you, then you are charged an over limit fee. It is riskier for the creditor to loan you more money than they think you can afford to pay back, so their way of recouping that cost is through an over limit fee. Be sure to check your available credit before you make purchases. Don’t forget to factor in finance charges that could set you over the limit if your balance is already close to the maximum amount.
Late Payment Penalty: Your credit card issuer will specify a certain payment due date when your minimum payment is to be made. If you fail to make a payment that is at least that amount by the named date, then you are charged a penalty fee. You must also be aware that late payments will be reflected on your credit report.
Some common credit problems that lead to increased debt:
Spending Beyond Your Means: It is tempting to over spend when someone grants you access to borrowed funds. However, when you cannot pay back the entire balance you run the risk of creating debt for yourself… and it is difficult to pay it off before you accumulate more. Be sure you always settle your debts before borrowing more.
Inability to Pay Monthly Payments: Do not assume that you can afford the monthly payments when you make a large purchase with your credit card. Always calculate the minimum payment beforehand and confirm that you can afford to pay that amount at the very least.
Not Paying on Time: Missing the deadline for your monthly payments will only incur more charges in the form of late payment penalties. Not to mention, the higher interest rates you will pay on other loans due to a lower credit score.
Accumulating Other Charges and Penalties: Similarly, if you fail to stay within the set credit limit set by your creditor you will incur a penalty fee. You should be extremely careful when this happens and immediately take action to lessen your debt before it becomes too much to handle.
Anyone who owns a credit card is at risk of accumulating debt. The best way to keep your debt under control is to keep track of your finances on a regular basis and practice disciplined spending habits.
