A credit card is known to be an effective solution for your money problem. It can also help you purchase products on credit, and you have the option to pay off the price over time, all for a reasonable amount of fees. But credit cards come with many pitfalls that, if not avoided, will have a substantial impact on your finance that will be difficult to recover. This article will look into the main reasons behind the bad press of credit cards and some easy ways to avoid the pitfalls.
They Can negatively impact your credit score.
Credit cards are notorious for negatively impacting your credit score. They usually come with high-interest rates, and missing one instalment of your loan will affect your score considerably. There have been many instances when a credit card user by mistake missed one small instalment of the card only to find their score taking a nose dip. Credit card scores are tough to increase, and you have to pay a considerable interest rate on a mortgage or other personal loan compared to your friend, only because of missing one credit card instalment. We highly encourage you to set up multiple reminders to ensure your ignorance does not cause substantial financial mishaps in the future.
Interest Rates are typically high.
Most investors would leap at the chance to earn a guaranteed yearly return of 10%- 15%, while credit card firms charge interest rates that are more than double that rate. Moreover, the interest rates can compound and quickly get out of control. With such high-interest rates, it is unlikely to achieve any financial objective of taking a loan via your credit card. Although convenient, try other sources of guaranteed loans before opting for credit card loans.
Credit cards come with a whole host of fees.
Credit card companies’ lust for money does not end with high-interest rates, their love for additional fees is uncanny; in fact, it is often argued that credit card companies make more money on costs than they actually make on interest. You should expect a sizeable late charge if you make a payment late. If you exceed your credit card limit, you will be charged an additional fee. You may have to pay an annual fee if you want a special-reward credit card. A balance transfer charge will apply if you’re going to transfer a balance from one card to another. If you use your credit card outside of Canada, you’ll almost certainly be charged a foreign exchange fee. It becomes obvious why many think fees constitute more than interests.
Credit cards increase your spending
Numerous study shows that credit card influences people to shop for things they do not necessarily need. Psychologically having a credit card gives you a sense that you have plenty of money to shop around for luxury goods when in reality, the money is not yours, and you often pay a huge premium for the money. Buying through credit cards also increases chances for an impulse buy that could otherwise be avoided when buying through cash.
Alternative to credit card
So what options do we have as a feasible alternative to credit cards? Well, for starters, you should try avoiding loans in the first place. But things only that you really need but having said that, we understand that life is unpredictable, and there can come an occasion when you do need a small cash influx to help with urgent financial affairs. For these situations, you can opt for a quick payday loan. These loans are easy to apply and get approved for, do not require any collateral, meaning you do not need to pledge anything to the bank, making it a safe loan. Payday loans can be applied online without ever visiting a physical bank. The interest rates are reasonable and have no additional hidden fees associated with them. To learn more about payday loans and to get a free quote visit our website at redpayday.ca