Credit Card Repayments
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The main attraction with credit cards are that the repayments can’t be spread over a fixed period of time, unlike the traditional bank loan. A credit card has a minimum monthly repayment usually in around 2% of the outstanding balance, but can change depending on the issuer and terms and conditions. Late fees are applied if the minimum repayment does not arrive in time with the issuing bank.
Given the way credit cards operate and the flexibility of their repayment terms, many people develop a debt that accrues over time. While many credit card companies try to attract new customers with incentives like airmiles, free gas, cashback and interest free periods, if you are thinking about applying you must ask yourself how disciplined you will be. All the offers may sound attractive but you may actually be lining yourself up for a debt problem.
Ask yourself:
- How often will you use the credit card?
- Do you have the ability to repay on time?
- Do you have a history of bad debt?
Recent figures suggest that 1 in 5 UK consumers are suffering from late payment fees and charges on unauthorized overdrafts. Are you sure you will not become another statistic who does not repay on time?