A Few Tips on Credit Use
The Credit Crunch
Annually, Americans pay credit companies billions of dollars in avoidable fees, beyond the requisite interest and balance transfers.
One key is to be aware of the fine print; then choose the company that seems to be on the level.The following will hopefully help anyone wade through the convoluted credit mess.
Credit can work for you if you understand what the credit card companies are trying to do; then, you can slip between the nets and benefit from the many promotions and increased credit history score (FICO) by using your cards properly.
Some people even make money by using their credit cards!
Credit Card Uses - Beware
Of course, when possible, you should always try and handle your credit balance completely by the end of each month.
Truly, if yo can manage to do that, the credit card functions practically like a debit card really, except that we gather in the gifts that credit companies frequently provide to responsible customers.
Additionally, your credit score is a very real figure that influences the interest rates you can get on important purchases.
If you don't us credit, you're missing out on great deals when it comes to car loans, personal loans, mortgage financing and many more.
The more responsibly you use credit, the better your credit score (FICO score) can be.
However, let us not fool ourselves with this apparently “good deed” on their part: it is this very reality that most people don’t pay the outstanding balance in full each month that keeps the entire credit industry in business (in fact, almost 69% of the $163 billion they bank annually comes directly from this).
Most of us understand and abide by this as part of credit-card-life; indeed, it is arguably the cost of borrowing money. A couple of things we don't understand, however....
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Credit Card Realities...
1 - Hidden - more often than not - in the tomes of credit-card lore, a practice that would widen most of our eyes were we aware of it.
There are many credit companies that begin charging you interest not from the moment they actually buy the item you charged from the merchant, but from the moment YOU charged it, which can be several days' difference.
This means that they are hitting you with an interest charge for no defensible reason, logically, because interest can't accrue on the promise of a charge; only on the charge, itself. Right?!
Why does this matter, you say? After all, someone could say that there shouldn’t be a problem because you bought the merchandise on that date.
In truth, however, it isn’t really fair, because if the company hasn't even purchased the merchandise yet, why should they start charging you interest on it!?
In the highly automated computer systems of credit card companies, your account pretty much reflects the facts of their purchase immediately, for all intents and purposes.
After all, if you were to cancel the purchase in the interlude between when you charged it and the credit company paid the merchant, you wouldn’t lose any money; so, why should they charge you interest during this inevitable “grace period”?
Since only some credit card companies do this, it is best to locate one that doesn’t, if you aren't the type to rectify your credit-card balances by month's end.
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More Credit Information
2 - It is important to realize that when dealing with credit companies, there’s so much that goes on behind the scenes, it can be hard to keep track of what we should be watching with our similarly hectic schedules.
Another thing to watch out for is deviation from the common 25-day interest-free time-span on purchases.
As though to buttress the previous point that whereas credit companies often seem to bestow gifts to patrons who pay in full monthly - before the finance charges strike - this is mostly for show.
Frankly, it's so that they can seduce more customers; credit companies are only in business solely because most card-holders carry over a balance each term, and their research makes it clear that this will occur.
The companies' true designs are shown by an increasingly common habit of decreasing the interest-free time-span to 20 days (in many cases, with little warning!).
Compounding the underhanded nature of this whole action, the wait period is lessened to around 23 or 20 days only for the credit-card holders who pay their balances off by the end of the billing period.
Could it be that the credit companies are trying to catch you by surprise!? All is not lost, however; you can actually request that they return to the previous due date of 25 days. Indeed, this is a running theme to keep in mind when dealing with credit card companies; if you ever have a problem that's costing you money, call them and complain - you'd be surprised how often they forgive a debt or issue. Just make sure you're not a repeat offender...
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Christina is a physicist with an interest in insurance on the side, so that she can be well-versed in credit card uses after she completes grad school, preparing for life afterwards.Her areas of expertise are strategies using high-end credit cards to make money, instead of paying to borrow it. She also contributes articles and SEO promotion to pinstor.us.
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