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Credit Cards: Escape The Trap!

Despite our best intentions, it is not always possible for most of us to pay off our entire credit card balances within the no-interest grace period, which is usually 25 days from the billing period end. Sadly, most of us are caught in what we call the "Credit Card Trap", making it increasingly difficult to pay down balances without getting hit with interest charges.

Thus, we have the trap. And the credit card companies love it.

Credit cards have become a bit of a double-edged sword in today's economic environment. While the convenience and low cost of credit make credit cards useful to almost everyone, many people find they've run up large unpaid balances on their card accounts and are subject to high interest payments. Card issuing companies profit by asking simply for a minimum payment, which is usually about 2% of the unpaid balance. What these payments do is essentially cover finance charges and 1 to 2 percent of the debt principal.

Minimum Payments - Debt Problems Waiting To Happen
Paying down your credit cards using only the minimum payment ensures a long debt repayment period and guarantees that card companies make extremely high profits on interest payments (often up to 500% of the principal). To add insult to injury, credit card issuers often encourage consumers to skip a monthly payment around Christmas in the guise of "A Payment Holiday". Meanwhile, interest charges accrue on the unpaid balance, and increase the total due.

Remember, credit card companies really never offer anything "free".

Escaping the trap is all about not carrying a balance on your cards. If you must carry a balance, make it a priority to pay down individual cards with the highest rates first. This can be accomplished by paying only the minimum on the cards with the lowest APR and concentrating on eliminating each credit card, one by one.

The trap is easy to avoid, but you have to spend responsibly. If you are finding the trap is very difficult to escape from, we recommend you contact us for a free consultation

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