Credit can be a wonderful concept, but it is easy for us to abuse. It reminds me of a mousetrap. Credit card companies know all about our vulnerabilities, and they lure us in with that cheese. We think that we'll be able to grab the cheese without getting caught, but they trap us every time.
Times of vulnerability
What is even worse is that they are getting us at the most vulnerable time - when we turn 18. I remember when they got me. I was recently out of high school and on my own for the first time. The independence is refreshing, but overwhelming. I thought I knew everything and I thought that I could handle it.
Credit card companies love to prey on teens. I remember them sitting on my college campus every day, enticing us starving (and broke) college students with free candy and T-shirts. I ended up with 13 credit cards in the first year that I was out of my parents' house.
Since teens have no credit, it is really easy to get these starter cards. The card may start with a $500 balance, but to a teen that has never worked, that is a lot of money. The credit card companies encourage teens to use the cards because activity increases the credit limit. Within months, the limit may go up to $750 or $1000.
Today, I want to touch upon some of the important things we should know about keeping good credit.
While we definitely do not need 13 credit cards (like I once had), it is still wise to have one or two credit cards. Certain vendors require credit cards for security purposes, such as car rental companies. However, we do need to be careful about which cards we decide to use.
Fees and expenses
One key determining factor has to do with fees and expenses. If we are not careful, it can cost us a fortune to use a credit card.
There are four fees to consder before signing up for a credit card: annual fees, over the limit fees, late fees, and transaction fees.
Annual fees serve absolutely no purpose. It is simply a cost to use that credit card. These fees can vary. I have seen a $59 annual fee, and I have seen cards try to soften the blow by charging it monthly. But $6 a month is still a $72 annual fee regardless of how it is divided. It doesn't make sense to pay extra fees to use credit rather than spend cash. If we come across a card with an annual fee, we should keep looking.
Over the limit fees wilcan be added when we charge more than our credit limit allows. For example, if we have a $500 limit and we spend $550, then there will be a $39 fee added to the next statement.
The over the limit fee can also be assessed if your monthly interest charge takes your balance over your credit limit. It is really important that we leave enough of a margin for the interest charge.
The amount that we go over the limit is irrelevant. We can go over the limit by $1 and the fee will still be enforced. That happened to me once at the gas station back when I was in college. I knew how much room I had available, but I didn't stop the pump fast enough. I went over by $1 or $2. When my next bill came, there was an over the limit fee. That was the most expensive tank of gas I have ever purchased.
Credit cards companies are specific about when your payment is due. It is important that you honor that deadline. Read the fine print on the back of your statement to understand how the company determines when your payment arrives. If it is not in by their deadline date, a $39 late fee is assessed.
Similar to the interest charge taking you over the limit, a late fee can also take you over the limit. That will result in two penalty charges.
Transaction fees are assessed with balance transfers or cash advances. While the credit card company may make these transactions look appealing, they are simply looking for more ways to earn profits. Usually, these are not in your best interest. Please read the fine print and think carefully before deciding to use either of these services.
These are tough times, and many people are feeling the pressure. But as we move forward, let's do so with discernment. Remember and focus on the keys to prosperity. A rash decision could cost more than you want to pay.
Times of vulnerability
What is even worse is that they are getting us at the most vulnerable time - when we turn 18. I remember when they got me. I was recently out of high school and on my own for the first time. The independence is refreshing, but overwhelming. I thought I knew everything and I thought that I could handle it.
Credit card companies love to prey on teens. I remember them sitting on my college campus every day, enticing us starving (and broke) college students with free candy and T-shirts. I ended up with 13 credit cards in the first year that I was out of my parents' house.
Since teens have no credit, it is really easy to get these starter cards. The card may start with a $500 balance, but to a teen that has never worked, that is a lot of money. The credit card companies encourage teens to use the cards because activity increases the credit limit. Within months, the limit may go up to $750 or $1000.
Today, I want to touch upon some of the important things we should know about keeping good credit.
While we definitely do not need 13 credit cards (like I once had), it is still wise to have one or two credit cards. Certain vendors require credit cards for security purposes, such as car rental companies. However, we do need to be careful about which cards we decide to use.
Fees and expenses
One key determining factor has to do with fees and expenses. If we are not careful, it can cost us a fortune to use a credit card.
There are four fees to consder before signing up for a credit card: annual fees, over the limit fees, late fees, and transaction fees.
Annual fees serve absolutely no purpose. It is simply a cost to use that credit card. These fees can vary. I have seen a $59 annual fee, and I have seen cards try to soften the blow by charging it monthly. But $6 a month is still a $72 annual fee regardless of how it is divided. It doesn't make sense to pay extra fees to use credit rather than spend cash. If we come across a card with an annual fee, we should keep looking.
Over the limit fees wilcan be added when we charge more than our credit limit allows. For example, if we have a $500 limit and we spend $550, then there will be a $39 fee added to the next statement.
The over the limit fee can also be assessed if your monthly interest charge takes your balance over your credit limit. It is really important that we leave enough of a margin for the interest charge.
The amount that we go over the limit is irrelevant. We can go over the limit by $1 and the fee will still be enforced. That happened to me once at the gas station back when I was in college. I knew how much room I had available, but I didn't stop the pump fast enough. I went over by $1 or $2. When my next bill came, there was an over the limit fee. That was the most expensive tank of gas I have ever purchased.
Credit cards companies are specific about when your payment is due. It is important that you honor that deadline. Read the fine print on the back of your statement to understand how the company determines when your payment arrives. If it is not in by their deadline date, a $39 late fee is assessed.
Similar to the interest charge taking you over the limit, a late fee can also take you over the limit. That will result in two penalty charges.
Transaction fees are assessed with balance transfers or cash advances. While the credit card company may make these transactions look appealing, they are simply looking for more ways to earn profits. Usually, these are not in your best interest. Please read the fine print and think carefully before deciding to use either of these services.
These are tough times, and many people are feeling the pressure. But as we move forward, let's do so with discernment. Remember and focus on the keys to prosperity. A rash decision could cost more than you want to pay.