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The second shortcoming regarding using credit cards, comes from additional costs or expenses of using credit cards, if full monthly outstanding balance is not paid by due date. This is due to interest charge, or cost of borrowing money. Generally, credit cards carry a higher interest rate, in comparison to say a line of credit at your local bank (bear in mind that there are low interest credit cards available). If you do not pay off full outstanding balance by due date, you will find that you will have an interest charge added to your account, generally calculated on full amount of original outstanding balance.
Yes, that’s right, generally interest charge on credit card bills is not for difference between what you have paid and what you still owe, but rather on full amount. For example, say your outstanding balance to be paid by your due date is $1,000 and you pay $999 by due date, you will actually incur interest charges on full $1,000 and not $1 still owing.
If a credit card user has difficulty in paying their credit card debt, addition of monthly interest charge on full outstanding balance will make paying off credit card debt even more difficult.
If you pay off your credit card balance in full by due date each month, you can avoid additional expenses (interest charges) that might contribute to financial difficulties regarding bebt repayment. By paying off your credit card balance in full by monthly due date, you may also improve your credit rating.
To avoid credit card abuse, remember to try to follow these two important tips:
- Don’t make more purchases on your credit cards, than you are able to pay off in a reasonable time.
- Pay off entire credit card balance each month, before due date.
For more credit card information and online credit card applications, please visit www.lots-of-credit-cards.com.
John Vink edits and manages a number of web sites, including 2 financial related web sites: