Why You May Be Paying More Than You Need For Your Credit Card
February 11, 2008 – 8:21 pmRemember the old “Choose Your Own Adventure” children’s novels that were written in the second person? Would it be interesting if one of these kid’s novels was written about credit cards? Let’s imagine what the book would read like…
When it comes to the biography of your financial history, very few people have as good of a history as you. After all, you have a good job that pays $40,000 a year. When it comes to bills you have an have always paid your car payments, you apartment rent and your utilities on time every month. You are not a big fan of using a credit card and you have only had one card for the past five years. The balance on the card has never been higher than $2,000 and you always pay 300% of the minimum amount due every month. Currently, you have a balance of $800 and your credit rating is about as near perfect as it could get. So, why on earth are you paying 19% interest?
The card you possess was a card that you happened to get a few years ago by filling out an online application. It seemed like a good deal because it provided travel miles and you figured that you could end up with a free trip to the Bahamas for your troubles. Well, one of these days you can cash it in for a free trip. In the meantime, with the credit rating that you possess you could have gotten a much, much lower rate of interest. You should have shopped around!
Yes, the morality tale of this “Choose Your Own Adventure” novel is obvious: no one should pay more for a credit card than what is absolutely necessary.
While credit cards may look alike, they certainly are not alike. If all credit cards were the same then there would only be one bank issuing the cards. Of course, this is not reality and all the various credit cards distinguish themselves by their various terms and conditions as well as their annual fee and interest rates. From this, people make specific choices regarding which credit cards offer the best deal for them. Unfortunately, in many instances people end up selecting and using credit cards that are generally not all that beneficial to them. The previously aforementioned example of the high interest rate credit card is a classic example of what many people needlessly go through.
Like any other product, it is critical to “shop around” for the best deal that can be found. Interest rates – as well as annual fees – are costs associated with a credit card and in many instances a person can do much better than what they have acquired. This is why it is critical to look at several credit card applications from a variety of financial institutions. Keep in mind, to avoid overpaying for a credit card it is always important to look for a credit card from a reliable institution and not one that is loaded with hidden costs. (There are some very dubious lenders that charge significant “activation fees” for example) Of course, if you already have a credit card the question remains as to what to do if you already have a credit card that you may be paying too much money for.
If you have a card that is too costly and you have good credit, then it becomes critical to look for a card that has a lower interest rate and then transfer the balance to the new card. Yes, it is as simple as that. If you have excellent credit then this should not be a problem. Also, if you have excellent credit there is no reason to find yourself in a situation where you are overpaying on a credit card so making a balance transfer is highly recommended.
Overpaying on a credit card is usually the result of not reading or understanding the terms and condition of a credit card or simply not comparing various cards that may be available. As such, the best way to avoid overpaying on a credit card would be to stay away from overpriced cards at the outset.
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