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Save $$$ when using creditFeb 26 '01 Write an essay on this topic.The Bottom Line The best ways to avoid credit card debt is frugal spending and good debt management. The first defense against debt is getting the best loan rates and credit card deals possible. Good debt management will bring excellent offers like 5.9%, 2.9%, even 0%. You may be wondering how the lending institutions profit on a 0% rate. Obviously they do not make a bundle, however they do make some money off this offer when you use their card to make a purchase because the seller is charged a nominal fee. The bank hopes that you keep a balance on their card after the offer ends thus the real money goes to the lending institution. In some cases interest rates jump to a whopping 20% or more. You should not have to suffer rate gouging if you have good debt management and have been faithfully paying as a long term user. If you carry a balance on your card it may interest you to jump from one low-rate card to another when you get the chance in order to keep your rates as low as possible because that APR is the key factor in what you're paying in finance charges. Search for no transfer fees and no annual fees. The only thing that makes one loan better than the other is the overall cost. Taking advantage of low-rate offers is where the bulk of interest savings are found. However, there may be hidden costs. It is imperative that you read and understand every bit of the fine print. Look for details and conditions in the offer such as (1) interest rate, (2) date the offer expires, (3) introductory rate expiration date, (4) how are payments applied, (5) amount allowed to transfer, (6) fees that may be imposed on balance transfers, (7) grace period, (8) late payment conditions, (9) how is the transfer conducted, (10) different rates for different amounts transferred, (11) annual fees, (12) rate after the promotion expires. Two aspects of good debt management is amount of credit you have and your history of payments. Too much credit available can raise the rate you pay to borrow. You can also have too little credit, sending a red flag to lenders. It is best to have a good payment history, paying your bills completely and on time. If you have more than one or two late payments you'll find yourself paying higher interest rates. Frugal spending is the key to being debt smart. Lending institutions deserve to make money but not by rate gouging. Spend efficiently and search for a fair rate. A word of caution here. People who are continually transferring balances and closing accounts demonstrate a pattern that concerns potential lenders. Also, make sure the account is closed properly, "at the customer's request". That tells anyone checking your credit report that you made the decision to close the account. If you work hard at being debt free you will achieve your goals. The only time you'll fail is when you quit. It's your responsibility to get the best deal.  |
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