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Yamini Bhaskar
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credit card - December 27th, 2008

Avoiding credit card debt

As we mentioned above, We recommend that if you get a credit card, you should plan to pay the full amount owed every month. That way you avoid the exorbitant interest rates the cards charge, and you also benefit from the grace period (which in effect enables you to borrow money for a few weeks for free).

In order to accomplish this, determine how much you're able to pay on your credit card bill each month and then stick to that limit. At the end of the month, pay the full amount, just as if it were any other bill, like rent or utilities. Also, examine each monthly statement to make sure there are no inaccuracies or fraudulent activity, and report anything you find immediately.

If you usually pay the balance in full but are going to be late with one payment, call the credit card company and find out how much you will be charged as a penalty. Include that amount in your check, so that the fee doesn't appear as a balance on the following bill, which would eliminate the grace period and result in more interest charges.

If you expect to have difficulty paying off the bill every month, consider using a debit card (which draws from your bank account) or an American Express card (which doesn't allow you to carry a balance from one month to the next). Remember that if you owe money on your credit cards, you're really borrowing from your future earnings, which is a bad habit to get into.

Escaping credit card debt

If you already have credit card debt, you're not alone. The average family has a credit card balance of about 50000, meaning they pay more than 5000 a year on just the interest. But this is an expensive cycle to get into, and these folks would benefit greatly by working their way out of this debt as soon as possible. Debt isn't always a bad thing, but it can become a problem if not handled property. It isn't the end of the world, but it is important to resolve the situation as quickly as possible because doing nothing will almost always lead to more problems.

Watch for these warning signs:
You often spend more than you earn.
You often pay just the minimum required amount on your cards.
You skip payments on some bills in order to pay others, or use cash advances on one card to pay another one off.
You have reached the limit on ("maxed out") one or more of your cards.
You dread opening your bills each month.
Creditors are calling you about overdue bills.
Your consumer debt exceeds 20% of your net income after taxes, or your total monthly payments on all debts exceeds 35% of your monthly gross income.
You're considering filing for bankruptcy.

If you do feel that the debt you have might be a problem, here are a few tips for improving the situation:
Determine how much debt you have, and put together a plan for repaying it. If you're currently paying the minimum amount required on your credit cards, stop doing so, and pay the maximum you're able to. If you pay the minimum, it will take you 20-40 years (!) to pay off the balance, meaning you'll pay more than five times the actual debt in interest.
If you have multiple cards, pay off the ones with the highest interest rates first.
Consider switching to a card that offers a lower interest rate.
If you're a homeowner, consider a home equity loan. The rate will usually be significantly lower than that of a credit card, and the interest on these loans is generally tax deductible.
Avoid luxuries, impulse buying, and any unnecessary spending.
Keep track of your expenses so you can determine where your money is going and keep a tight lid on expenditures that are higher than they need to be.
Limit your credit card usage to the bare necessities, and cancel most of your cards, just keeping one or two. If the situation is dire, try to stop using your credit cards entirely.
Don't expect a quick fix. Fighting your way out of debt takes time and perseverance. You should do it as quickly as you can, but understand that you're fighting an uphill battle that might take some time

Consider debt consolidation. It's possible to consolidate your debt into a single payment, to simplify the process and sometimes to save money. But be careful, as there are some expensive (or even unscrupulous) debt consolidation services that can end up costing you money rather than saving you money.
Once you've paid off the debt, start to build a cash cushion to protect you in the event that unforeseen circumstances require money. That way, you won't have to run up debt again to deal with them.

What to Consider when Choosing a Credit Card

One of the reasons that there are so many credit cards to choose from is that not every card is right for everyone. If you pay off your balance every month, you will want a different card than someone who carries a balance. Also, if you charge enough, you might be willing to pay an annual fee in order to receive rewards like airline miles in proportion to your purchases. Use the sites in this section to find out which card is best for you.

It is recommended that you limit yourself to one or two credit cards. This makes it easier to keep track of your balances and to avoid mistakes like late payments and penalties. It can also help your credit rating, since people who have a large number of credit cards tend to be viewed as more of a credit risk.

Some factors that you might want to consider when choosing a credit card:

Fees: This is probably the most important consideration. Fees include the annual fee, the interest rate charged on balances (called the Annual Percentage Rate or APR), late payment penalties, and any other fees they charge. If you plan to pay your bill in full every month (as we strongly recommend), you'll want to find a card with no annual fee. If you expect to carry a balance, you'll want to choose a card with a very low interest rate, ideally one that guarantees that low rate for an extended period. Find out if there is a grace period before interest starts accruing, and if so, how long it is. Also find out how interest is calculated (for example, the average daily balance of the last cycle, or of the last two cycles, or something else entirely). Some issuers charge a fixed APR, while others charge a rate that's tied to an index such as the prime lending rate. Finally, find out whether there are any other charges, and under what circumstances they are assessed. For example, most credit card issuers charge a fee for cash advances, and some charge a fee when you close the account.

Acceptance: Some cards are accepted at more locations than others. The two that are the most popular in the United States are Visa and Mastercard, and both are accepted at just about every merchant who accepts credit cards. American Express, which is a non-revolving credit card, is also relatively popular. If you're considering another type of card, be sure that it is accepted at the types of places where you will want to use it.

Perks: A lot of credit cards come with benefits, such as rebates and frequent flier miles. Try to estimate the dollar value of any such benefits when deciding which card to select.

Credit Limit: This is the maximum amount that you are allowed to charge on the card (until you pay some of it off). In general, the more they allow you to borrow, the better, as long as you plan to pay the full amount each month. Otherwise, it can be dangerous to have too high of a credit limit, because if you're not careful, you could dig a hole that's tough to get out of.

There are several ways to search for credit card offers. The simplest is to open your mailbox, which probably supplies you with a steady stream of credit card offers. But as with most things, the simplest solution is not necessarily the best. Fortunately, the internet can help you track down the best credit card offers. Try to find two or three cards that meet your requirements, and then compare them. Read the fine print, to confirm that you understand all the terms of the agreement.

In order to obtain information on credit cards with low Annual Percentage Rates (APR), visit the Cardweb website. Another source of information is BankRate.

You may currently have a credit card that you're reasonably happy with, but are getting offers for cards with significantly lower rates. But look before you leap. These so-called "teaser rates" are generally offered only for a very short time period, after which the rate returns to normal (in other words, high). Find out how long the introductory rate will be in effect, and decide beforehand what you will do when the rate goes up. Some people try to jump from one introductory rate to another, but the issuers are making this increasingly difficult because they don't want customers who do this. Before switching, it's worth contacting your current issuer and telling them you're thinking about switching, and asking if they can lower the rate. Sometimes they will do this, because they spend a lot of money acquiring new customers, especially profitable ones who carry a balance, and they don't want to lose you.

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Re: credit card - April 25th, 2009

today use of credit cards has fallen to 30% so banks r suffering heavy losses because no 1 is using credit cards for any payments

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Re: credit card - July 1st, 2009

yep....n the interest rates that they charge are too huge!!
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