Carrying cash may be cumbersome sometimes and risky too.
Undoubtedly, the arrival of credit cards on the scene has made life simpler and convenient.
For some people using credit card is a way of life, whereas for some handling cash is a better option. We notice that many people use their credit cards wisely whereas there are few who are careless towards their credit cards. Remember if not used wisely, Credit Cards can make one’s life miserable. .
In this article I have analyzed the common mistakes that cardholders make and how they can avoid these mistakes.
Ignoring the terms and conditions
No doubt the terms and conditions are quite difficult to understand, but one needs to try. Ignoring them is not going to make them disappear. Many cardholders are surprised when they notice a change in interest rates or annual fees being charged on their free for life time cards. Read the terms and conditions carefully and try to understand them. If you have any difficulty, you can call up the customer care division for clarifications or simply search on Internet for the meaning of those terms.
Ignoring Monthly Statement
Reading your monthly statement is as important as reading the terms and conditions. Keep a track of your monthly spends on credit cards and cross check for any suspicious charges on your card. Call customer care immediately if you notice any spends that you did not make are being reflected in your billing statement as credit card frauds are rampant.
Paying only minimum dues
Minimum monthly dues are usually 5% of the total outstanding amount. At this rate it will take more than a year to pay off the entire dues. It is a happy situation for the credit card issuer, but not for the cardholder. The card issuer will get its share of high interest rate, which can range between 26% – 47% p.a. including service charges. Secondly, all the new purchases on the card get combined with the outstanding amount and the interest is charged on the combined balance. Paying only the minimum amount due will keep the cardholder in debt for a long time. Whenever possible pay more than what is minimum due to keep the debt down to manageable level.
Ignoring payment due date
Make sure you know the payment due dates on each credit card you hold. Delayed payment will add more burden on your finances with hefty interest charges and late payment fees (up to Rs. 787/-) and frequent delays in payment will also affect your credit score. If you have been paying your dues on time and have missed one payment, you can call up the card issuer and request them to waive the penalty charges though it is not a binding on them to do so.
If you have not done it till now, then subscribe immediately to the card issuer service of sending an sms or email reminding about the payment due date. If you are frequent traveler or too occupied with your professional obligations, subscribe to auto debit facility. But make sure there is enough balance in your account to avoid any payment dishonour t, else you will be penalized from both ends i.e. your banker as well as card issuer (up to Rs. 562/- incl. service tax).
Overspending
Impulse shopping on credit card gives a kick, but on the wrong side and by the time we realize it, it is too late in most cases. This is how the debts on credit cards grow.
Before you shop on credit card, just analyze your financial situation and ask yourself:
1. Do you really want it?
2. Can you really afford it?
3. If buying on EMI, how much it will cost and how long you will be paying?
Try answering these questions before you make those purchases. This will help you take a little control on your finances.
Avoid withdrawing cash against credit card
Withdrawing cash against credit card is as simple as withdrawing cash on your debit card. But the trap lies in the withdrawal fees, which is usually up to 33.7% p.a. incl. service tax plus interest rate ranging from 26% – 47% p.a. including service charges. Remember that the interest rate is applicable from day one as there is no free credit period for cash withdrawals. Do not ever fall in the trap of withdrawing money against your credit card unless and until it is an extreme emergency. Then too make sure that you pay back the same at the earliest.
Having multiple credit cards
Having and managing multiple cards can definitely increase your credit ratings. But remember that each application for credit cards gets registered as an enquiry in your credit report. Excessive numbers of such enquiries indicates that you are “Credit Hungry” and in an urgent need of money. This makes the providers more cautious while evaluating your application for any credit facility. Don’t pick too many credit cards. Just have 2-3 cards that offer required credit limit and low interest rate on revolving credit facility. Acquiring too many credit cards is a temptation with many obsessive spenders.
This way we see that credit card offers convenience but only to those who use it wisely and do not fall into the golden trap (or Platinum, Titanium trap) laid by the credit card companies.
With the current state of the market, it will be almost impossible to predict what will be
ReplyDeleteavailable to you in February. I will however give
you some advice and a little inside info. The amount of money you can stash away for a down payment should be your top priority.
In your case, you will need one. The more you put away, the better your chances of getting a
loan. Your lender will require that you have some down payment (usually 10% down) and you will probably need a little
help. There are lenders out there that will lend up to 65%
to 70% of the purchase price of a home at a very high interest rate 13%+.
If you are lucky, you might even get up to 80% but that depends if those lenders are still
around in February. You will also have to ask the seller to carry a note for the amount you can't cover with the loan and the down payment. We'll take the worst case scenario other than being flat out turned down. You get a loan for 65% of the purchase price. That would be about $78,000 in your case. You have 10% down (hopefully) which is $12,000. You would ask the seller to do a seller carried second mortgage. This means that the seller would be willing to take payments on the remaining balance ($30,000) at a certain interest rate over a certain term in the form of a second mortgage. Usually 15 or 30 years. Best case probably is you get 80% financing. That would mean that your seller would only have to do a 10% ($12,000) seller carried second mortgage. Everything else stays the same. SO every month you would have 2 mortgage payments. One to the institutional lender on your first mortgage and the second to the seller on your second mortgage. Impossible? You would be surprised. It happens all the time and most of the nation is looking at a tremendous buyers market so sellers are willing to get very creative. You could also do whats called a lease to own. They are usually heavily in the sellers favor but can be used to puchase a home. There is also what are called wrap around mortgages that allow you to pay an actual mortgage payment every month without having to get a institutional loan. In many states, they actually allow you to be on title when the transaction is complete. Many counties, cities, and non-profit organizations have what are called down payment assistance programs. They will loan you funds to purchase a home and in some cases the loans do not have to be repaid. If those are not viable then there is always ACORN Housing. I attached the link. Be sure to check with your attorney or a good mortgage broker in your area since laws very from state to state. . . Hope this helps.
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thnx
ReplyDelete