Categories
Finances

Ways Credit Cards Can Hurt Your Personal Finances

Many people choose to shop with credit cards because of convenience. However, that convenience can turn into trouble quickly. There are many ways that credit cards can hurt your personal finances. You may even find yourself having to tap into your emergency funds to cover the costs of your credit trouble.

High Fees For Minimal Rewards
Those of you with a good credit score may get offers for rewards credit cards. While these may be tempting, they can come with high fees that outweigh the benefits of the rewards. Some cards come with annual fees of hundreds of dollars and just offer a single reward point for each dollar spent.

Low Interest Rate Promises That Become High
Many credit cards will lure you in with a low introductory rate. However, it is important to read the fine print. In some cases, this low rate is only available for a short period of time. After that time is over, the interest rate spikes significantly. Although not all cards are like this, you should make sure that you understand what you are signing up for.

High Transfer Fees
One way many people use to pay down their credit card debt is through balance transfers. Before transferring a balance, you should educate yourself on what it will cost. Oftentimes, the card the balance is transferred to will have an annual fee. You will also be charged an balance transfer fee and potentially a higher introductory APR for the transferred balance. All these costs together could make this move simply not worth it.

Closing A Credit Card
In addition to costs incurred through interest rates and fees, closing a credit card can hurt your personal finances. After paying down your debt it may seem like a good idea to close the card. This will ensure that you can’t use it again to build up a pile of debt. However, closing the card will hurt your credit score. This will hurt any future loans that you need to take out. With a lower score, these loans will likely cost you more. Instead, pay down the card and use it sparingly so it is still active.

Leave a Reply

Your email address will not be published.