Credit cards are certainly an advancement and a convenience of today’s time. They can make paying bills simpler as well as offering a chance to purchase something needed before the cash is on hand. Credit cards can also help take care of financial emergencies as soon as they arise. However, there are also sides to credit cards that can make life a lot more difficult. Not using your credit cards in the right way can hurt your finances. Here are some of the negative sides about credit cards that you may not have even known about.
One thing that most people know about credit cards is that paying off your credit cards on time can help increase your credit. This is why a lot of people use credit cards in the first place. However, one thing that many people do not know about credit cards is that if you stop using your credit card at all, it can also hurt your credit score. Banks today are always eager to cancel a credit account due to inactivity. If you don’t use your card for long enough the bank can close your account, this hurts your debt-to-credit limit ratio, which can hurt your credit. Getting a card canceled that is never used can lower your total limit by a few thousand dollars, but not lower your total debt since the card was not used. The best way to maintain a “for emergencies only” credit card is to charge small amounts to it regularly. That way it will be active and you will still be making on time payments to increase your credit scores.
Another thing that many people do not know about credit cards is that if you miss a credit card payment you can get penalized by every credit company that you have a card with. Mass fees like this can really hurt someone’s financial stability. There are other situations, such as using a card outside of its terms that can cause mass fees as well. This is why knowing your terms for the card can be invaluable.
Interest rates are really the credit company’s bread and butter. This is how credit cards are such a huge market. What many people do not know is that interest rates can be changed as long as there is fifteen days of notice. Even cards that have “fixed” rates can be changed. It is important to read anything that the credit company sends you because it can certainly be a letter informing you that in fifteen days you interest rate will go up.
Having information about credit cards is an important part of using them to their fullest potential. Hopefully this article has informed you on how not to fall victim to hidden fees and spiked interest rates.