A credit card can feel like a necessity in the modern age. Many credit card companies, despite advertising their products as low-interest – which is a very relative claim – are still charging you absurdly high amounts of interest. This high interest can significantly affecting your long-term financial security. If you’re applying for your first credit card, or obtaining a new one, below are some of the reasons why you need to avoid high interest rates on credit cards.
The biggest reason for avoiding high interest rates on credit cards is the long-term financial consequences. High interest rates mean that if you run a balance on your credit card, you will be paying a lot more money out of pocket to the credit card company. The higher the interest rate you’re charged, the more money you’re paying to borrow.
The more you buy on high interest rate credit cards, the more money you’ll have to fork over when paying back the loan. This means that you can quickly find yourself in debt, especially for run-away purchases. This lands a lot of people in financial trouble and hurts their credit rating if they are unable to pay back the money they owe.
Don’t be swayed by the perks
Often, credit card companies will attempt to gain your business by offering perks that come with the card, including increased points and rewards – but those points and rewards are paltry compared to the amount of money you could be saving with a much better, much less restrictive rate.
Paying off one card with another
Many times people with high interest cards who are unable to service the debt end up applying for additional cards, paying off debt while acquiring more debt. This can lead to even more financial problems in the future.
A credit card is a useful tool and a secure source of funds, but only if the rate of interest that you are paying on it makes financial sense. Applying for a card that charges an unreasonable amount of interest can quickly land you in hot financial water. If you are applying for a credit card, or thinking about applying for a credit card, carefully consider the debt terms being offered and make sure that you aren’t biting off more than you can chew. Most importantly, speaking with a licensed insolvency trustee will help you to better manage your debt.