We all know that too much of a good thing isn’t good for you. Too much debt isn’t good for you either – but neither is too little debt. When you’re in debt to the point that you can’t make payments on time and your credit score tanks, it can make your life miserable.
Some necessities, such as a home in which to live or a car to drive to work and back, may not be available if your credit score is low. If you have no credit at all, these things could also be beyond your grasp.
The best path to follow when it comes to debt is to build your credit so your score is high, but always have the ability to pay cash for anything you might purchase – except for high-dollar items such as a house or car.
Creditors look at credit card debt as bad debt because you’re only required to make a minimum monthly payment on what you owe. You can keep using your card until the balance is maxed out and that looks bad on your credit report.
Think again if you consider credit card debt as good debt because you don’t have to pay for your purchases right away. You could end up spending more than you have the ability to pay back as interest charges are incurred and you get in trouble fast.
When you begin to have trouble paying your bills, you’ll also begin to get notices from creditors for the balances you owe or they might be turned over to debt collectors. You may even become rightly concerned about losing your house or car if you can’t make the payments on time and penalties and interest keep climbing.
Losing your job or meeting a financial crisis such as health problems can turn your financial situation upside down and you may find it an overwhelming task to dig your way out.
Rather than ignoring your situation and letting the debt problems become worse, take steps to get yourself out of the mess by being realistic. Help yourself by cutting unnecessary spending, creating a budget and sticking to it. You may also want to consider debt consolidation or debt relief such as debt settlement or credit counseling.
Bankruptcy may become an option when you’ve tried everything, but still are mired in debt. If you’re experiencing a level of debt and other problems such as loss of a job or medical situation which requires immediate payment, bankruptcy may be the best option.
When you are finally free of debt, it’s time to rebuild your credit. For this, you have to have discipline and never again let yourself be swayed by credit card and loan offers that will simply put you back in debt and keep your life in chaos.
People are often attracted to the lure of rewards credit cards. They promise you points for every dollar that you spend, and when you accumulate enough points, you’re able to redeem them for cash, gift certificates or other excellent rewards. However, these sneaky little cards can actually cause some problems. Why is it a good idea to avoid them?
Time for Rewards
Some people think that they are going to start receiving rewards right away; however, this is far from the truth. It can take months or even years to reach the number of points that allows you to redeem a prize. While you might be a patient person, this is definitely something to consider when obtaining a rewards credit card.
Overspending Your Money
Sometimes the idea of receiving rewards is so appealing that you start spending more and more money just to accumulate those desired rewards points. However, this can actually be a huge problem. Instead of spending cash and money that you actually have, you’ll just be building up more credit card debt for yourself. Sure, getting $50 back from rewards points is great. However, if you racked up another $1000 or more in credit card debt just to do so, then you have really lost a lot of money in this situation. If you’re going to use rewards credit cards, make sure you pay them off right away.
Brand Specific Cards
Some credit cards will only give you rewards points if you go to the same type of place over and over again. For example, you might have a credit card on which you receive points every time that you purchase gas. However, that gas might have to be from a specific company. That can be quite inconvenient if you do not live anywhere near that gas company. Furthermore, it’s likely that you do not use the same gas station every single time that you fill up. You might wind up using your credit card only to remember late on that you will not receive any rewards points for the purchase that you just made.
While it’s not always the case, rewards credit cards tend to have high fees both in terms of interest and in annual rates. Before you decide on a specific rewards credit card, it’s very important to assess those fees. Do they make sense? Will the rewards that you receive outweigh the rates that you have to pay on the cards? You always need to read the fine print. Whether you are signing up for a rewards credit card or one without rewards, it’s always important to know what you are getting into.
It’s true that some rewards credit cards can provide you with excellent benefits. However, you’re going to find that these cards may be few and far between. Additionally, you need to have a lot of self control to avoid overspending on your cards and racking up tons of credit card debt. As always with credit cards, make sure you are as careful as possible.
Timothy Renaldi writes about personal finance, consumer reviews & more at http://www.termlifeinsurance.