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4/23/08

Actual and Potential Credit Card Usage Fees

Yes, credit cards can have costs. There are two main costs associated with credit cards: (1) interest rates; and (2) annual fees. Interest charges result only from the use of a credit card. Annual fees, on the other hand, are charged regardless of whether or not you actually use your credit card.

You should never have to pay to use credit cards. However, this is the exact effect of an annual fee. An annual fee is a payment by you to the credit card company for the privilege of using that credit card. There are far too many good credit cards out there that do not have an annual fee for you to obtain one with an annual fee. In essence, do not get a card with an annual fee, it is that simple.

In addition to annual fees, credit card companies charge other fees of which you may not be aware. If you are ever late on a payment, there is usually a fee. If you go over your credit limit, there is usually a fee. Know what these fees are and factor them into your decision as to whether to obtain that particular card. It is important to note that almost every credit card will have these fees. Therefore, do not refrain from obtaining a good credit card simply because these fees exist. Should you do so, you will not find a credit card.

Interest rates are another fee charged by credit card companies. First, you should notice that the interest rate is different for credit purchases and cash advances. Cash advances always carry a higher interest rate. Additionally, your monthly payment will not count towards your cash advance balance until your credit purchases balance is paid off. This is because cash advances carry a higher interest rate. Therefore, the longer that your balance remains unpaid, the more money the credit card company makes.
Also, make sure that the interest rate that is advertised is not an "introductory" rate or a "variable" rate. Introductory rates only last a couple of months (at most, one year). After that introductory period, your interest rate resets to the default rate. The default rate is usually a lot higher than the introductory rate. Therefore, be aware of what you are getting yourself into because you do not want to see your interest rate jump over twenty points at the end of your "introductory" period.

Variable rates change with economic conditions. Therefore, you could have a great rate one month and a terrible rate another month. Granted, the rate changes are not dramatic. Therefore, you will not go to bed one night with a 9% interest rate and wake up the next morning with a 20% interest rate. The changes are gradual. However, do not play a guessing game with your credit card interest rate. Get a low fixed rate, and you will be much happier.

Know the costs that are associated with a credit card. By doing this, you will be able to make the best decision possible based on your needs and wants.


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4/1/08

How Long Should You Rent Before You Buy A House?

There are many consideration to make before your should decide to buy a home. A home is an expensive purchase and thus, absent you having a large cash reserve, you are going to have to borrow the money to purchase your home. As such, you are going to have to consider your credit score, your monthly income, your monthly obligations, and the price range of homes that are within your economic range, to name a few. Additionally, depending on the current economic condition, your interest rate for your mortgage is another consideration. You also have to consider you job situation and whether it is likely you will move out of your current city or state. This consideration is important because if you need to sell you home in order to be able to afford to move, the status of the real estate market is going to dictate how quickly you can move.

If you discover that you cannot currently afford to buy a home, your alternative is to rent for the time being. This does not mean that you will never be able to buy a home. Renting for now simply means that due to your current financial or credit situation, you will have to refrain from purchasing a home. If this is your current situation, you may be wondering how long you have to wait until you can buy a home.

The answer to this inquiry depends on all of the factors discussed in the first paragraph. If you can financially afford to buy a home, have the credit in order to qualify for and obtain a loan (should you need a loan), and do not plan on making any long distance moves at any time in the near future, you should be in a position to buy a home. However, even if you are in position to buy a home, depending on where you live, there may not be any homes available for you to buy.

There are many cities and towns that are not expanding or have no room to expand, and as such, the total number of homes in that area remains constant. As such, you may have to wait for an opening or may have to look for a home in another location. Therefore, even though you are ready, willing, and able to purchase a home, the current real estate market may not allow you to do so.

If you can financially afford to do so, you should consider purchasing a home. Even though overcoming the financial and credit obstacles are the hardest burdens to overcome when purchasing a home, the current real estate market may be a factor that prevents your purchase of the same. If this occurs, be patient and maintain your financial and credit situation so that when a home becomes available, you will be able to purchase the same.

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