Problems Getting Approved For Credit?
It is getting easier with the use of credit cards to purchase items online or over the phone. Many companies require a credit card for things such as renting a car, renting a hotel room, ordering flowers over the phone, etc. In this case credit cards are also used as identification for most car rentals and for cashing checks.
Credit cards are easier to use to track money than just dealing on a cash basis. Credit cards have automatic record keeping which makes it easier to see where money has gone at the end of the month. Credit card companies also send a break down of where the money was spent. This if used for the budgeting purpose is useful to help break everything into categories. Credit cards are easier to cancel and reorder if lost or stolen where cash cannot be replaced.
Credit cards are useful over the holidays. It’s useful to have the bills consolidated into one instead of six or seven separate bills. It also allows more freedom for the holidays if the consumer keeps in mind that the bill has to be paid by the end of the grace period. This is also great if the credit card comes with added incentives such as frequent flyer miles. Putting all the holiday gifts on the card would add up for these such incentives.
Credit cards more often than not are useful to place orders over the phone for flowers, hotels, cars, or even paying bills. It’s fast, fairly simple, and convenient for those consumers that have a difficult time getting there bills paid through the use of the post office. With the use of credit cards even hospital bills can be paid. An example of this is when my wife was in the hospital having my little girl. They stated that if I paid in one payment that I would receive a discount of $300.00. This was excellent because I got a discount from paying in full. Yet I made sure I had the cash in savings to pay at the end of the grace period.
The use of credit cards for leverage against merchants when problems come up is another reason to have a credit card. The payment can be delayed until the problem is solved between the consumer and the merchant. My grandparents use credit cards on vacations. The reason they do this is because on one trip they were overcharged and were able to solve it only because of the use of a credit card. After having that experience they advised me to apply for credit cards for leverage against companies who are trying to over charge. (Acceptable Uses of Credit)
Consumers also have to be careful about credit cards. They can be very risky. Consumers are constantly tempted to overspend with credit cards. For example, when women decide to go out with their friends they are tempted to spend right along with the ladies whether they have the money to pay for it or not. On television it is all too common to see sitcoms say the words “charge it” or when a sitcom student goes on a shopping spree with the parent’s credit cards. This is an all too common mistake that can reap havoc on bank accounts.
Another issue with credit cards is that they are used to buy nonessential items such as the latest toys for the kids or gifts for friends. These are items that without a doubt are not necessary to buy on credit. This also could lead to impulsive spending.
The most common problem with credit cards is that the bill comes and it is either forgotten, half the amount is paid or just the minimum balance paid. This can cause big late fees, as well as black marks on credit reports. Millions of people are now paying $25.00 to $30.00 a month in 15-25% credit card interest. This also can cause many companies to use interest backdating. This is when consumers don’t pay off their monthly charges in full. Then some credit card companies start to charge interest form the purchase date. Other credit card companies use two-cycle billing, this is used to calculate interest which results in the consumer paying two months of interest if the first month was not paid in full. This only occurs when the consumer pays regularly then switches to pay only the minimum balance. As anyone can see this starts to add up and can lead to the beginnings of a financial pit fall. (Acceptable Uses Of Credit) In the article It Pays To Be Careful With Credit Cards a small business owner in Dallas, Texas charged $75,000 to a credit card. He was unable to pay it all off during the grace period. He had to pay the minimum payments each month. Geri Detweiler, a credit consultant, stated that it would take the small business owner at least 30 years to pay that amount off with just the minimum payment paid.
After mentioning many ways that consumers can use credit cards efficiently and improperly I have to say that in our society today there are many people that abuse the use of credit cards and find themselves in a financial pit that they cannot escape.