For many consumers, credit cards are seen as tools that will only harm their credit. Oftentimes we forget that credit cards can be very beneficial and rewarding, when used correctly. By following some simple and valuable tips, you can successfully build your credit while conveniently improving your score. Below, we will look at some smarter ways to use our credit cards. This begins with recognizing certain items that you should NEVER purchase with your credit card.
Having a credit card with a high credit limit does not mean you should exhaust that limit quickly. One of the biggest mistakes you can make is putting an extremely large purchase on your credit card. As you pay back this amount, you will also be paying an exorbitant amount of interest along with it.
If you miss a payment, you are subject to harsh penalties and this can put you further in debt, thus ruining your credit. This is known as the “Snowball Effect.” Instead, make small, semi-regular purchases and be sure to pay off the entire balance each month. This activity will reflect very positively on your credit score.
Never pay your medical bills with your credit card. Medical bills are expensive and paying them with your credit card will only add unnecessary interest fees to your bills. Credit card interest rates may range anywhere from 10% to 30%.
Instead, speak to the medical billing or collections department and ask about your options. Many hospitals and medical facilities can offer you a payment plan directly with them, which will often have much lower interest rates. Sometimes, dependent on your financial situation, you may even be eligible for a “write-off” where the bill is cleared and you may not need to pay it at all.
Student debt is another expensive bill that should never be put on your credit card. Much like medical bills, student loan interest rates are significantly lower than the average credit card interest rate. Using credit cards to repay these expenses will only prolong the process and add extra interest fees to your balance. Some lenders also charge a “processing” or convenience fee to those paying with credit cards.
Instead, set money aside that you can use expressly toward your student loans. You could set up a bank account for monthly student loan deductions. There is also the option of an income-based repayment (IBR) plan, where if you qualify, your student loan payments will be recalculated based on your income and family size. If you are facing financial hardship, are enrolled in further schooling or the military, you may be eligible for deferment or forbearance. You can also find out if loan forgiveness is an option for you as well.
If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.