Why you should avoid buying things using a credit card

Why you should avoid buying things using a credit card

Studies show that we end up spending 15 percent more when we buy things on credit. For people that purchase everything on credit, that means that if they spend $2000 a month, the total amount they placed on credit is 24,000 dollars in a year. The 15 percent is equivalent to a whopping amount of $3,400. That kind of money does not have to be spent if a person pays using cash or a debit card. Though most credit cards offer some kind of reward or even cashback, it might just be worth a small percentage of all the money that was spent. 

credit-card

Associated costs 

For those who make payment transactions using their credit card, it is easy to see where the money goes as it appears in the statement. To own a credit card might be free at first, but there are typically fees that have to be paid, such as the annual fee. Aside from that, there might be other charges, such as interest, for canceled payment transactions, and credit card payment processing. 

If you have a credit line, be it for a loan, mortgage, or for a credit card, there will always be an interest rate that you would have to pay for. You need to know what the interest rate is for the debt that you are paying to be able to make a comparative study. If the interest rate is higher than that of other companies, you can negotiate with them or take your business somewhere else to enjoy paying lower interest rates for making an online credit card payment.           

Pay your balance in time

If there is a balance on your credit card, this and the monthly payments also must be reviewed. For example, you may have a $500 balance and have to pay an additional 15 dollars because of interest. It is advisable to pay off the entire balance or increase the amount that you pay for the debt to be paid off in order for you get rid of debt and not pay interest that can be compounded. 

Be a wise spender

When we think about borrowing money, it can be the solution for emergencies and give us more purchasing power. But being in debt can be a problem, especially if the loaned amount is not paid. There are credit collectors that will not give up making phone calls and sending in emails to request for payment. There are also times that failure to pay off debt will lead to a court case. 

It is good to have a credit line as it can be the key to making more significant purchases, such as that of a house. However, if the income is not sufficient enough to pay back the loan, there indeed will be headaches. To use a credit card frequently should be avoided as there is that 15 percent that will be spent, and that can amount to a lot of money. Be a wise spender and use other payment methods instead of a credit card.