Don’t Pay Only the Monthly Minimum on Your Credit Card-Part Two

Don’t Pay Only the Monthly Minimum on Your Credit Card-Part Two

You may think that when you pay on time the minimum amount due on your credit card at the end of each month, you’re being financially responsible. Think again.

In our first episode we talked about how does the long repayment works.

This episode will go in depth regarding how paying only the minimum monthly payment can cost you a huge and unnecessary amount of interest in addition to repaying the original sum.

Skyrocketing Interest

Say you’ve got an outstanding balance of $2,000 on your card. Your minimum payment would initially be $40 (2% of $2,000).

If you make only the minimum monthly payment of $40, it would take you 30 years and 10 months to pay off your balance and you would end up paying $4,931 in interest!

You would be much better off financially if you could increase your monthly payment to $100. So then, you would need only two years to pay off the balance in full and you would pay only $395 in interest!

That’s a saving of $4,535 !

So, upping your monthly payment by even a small amount can save you a whopping amount of interest.

In our final episode of this series we’ll discuss how the minimum payment is applied.

For more valuable financial advice, please visit us at prudentfinancialservices.net

The Pro’s and Con’s of Taking a Cash Advance on Your Credit Card

The holiday season is already upon us! We as consumers are left making difficult choices in how we choose to spend our hard earned money. When making decisions always way the pro’s and con’s before deciding to go ahead. Taking a cash advance on your credit card is an easy solution that can later have drastic consequences if not fully thought out. Here are just a few things to keep in mind when making the decision to take that advance.

The Pro’s in Cash advances off your Credit Card

·      Cash advances enable you to obtain the cash you desire at your convenience. It’s a very easy solution and you can use it as you see fit.

·      Cash is usually untraceable so that there isn’t any paper trail tying you to where and what you spent it on. For example if you are purchasing something for your significant other (a gift for the holidays but don’t want them to know about it?) cash is a great idea.

·      Some retailers will give you a better deal if they receive cash since they don’t have to pay for the transaction fee on their end. Saving the retailer up to 3.5% by using cash plays a big part in negotiating a better price. Often we forget retailers are also charged by the credit card companies when we use our cards at their locations.

·      If you are in another Country and you need local currency (regardless of the interest that may start immediately,) you will most often receive a fair exchange rate. Know your exchange rate and interest before making that trip.

The Con’s in taking the Cash Advance

·      Most often interest starts as soon as you take the advance out on your card.

·      There may also be additional fee’s associated from the bank machine you withdraw from on top of the interest that starts immediately.

·      If you have not found out your daily limit you could be in for a rude awakening and not be able to take out as much as you need, due to daily limits set up you were not aware of. These limits are usually for your protection incase you loose your card or are robbed.

·      Banks are notorious for upping your card limit with out you knowing. Know your balance before you make the choice so that you are not left stranded thinking you have availability left on your card.

·       Understand that the Banks will apply any payments you make to the older debt and not to your advance regardless if your old debt is with in the interest free grace period.

Other Options to Consider Instead of a Cash Advance

A short-term personal loan from the Bank or other third party lending institutions may give you a better rate instead of your Credit Card Company. You may also be able to negotiate payment terms that won’t look bad on your credit history if you can’t pay back the full cash advance.

The Bottom Line

Do your homework. Call your credit card company and fully understand all the variables. Don’t be embarrassed to ask about every possible scenario.

Questions you may consider asking: What is my interest rate? Will it start as soon as I take the advance? What is my daily cash advance limit? What additional fees could be applied, if so under what circumstances? What is compound interest? Will my monthly payment change?

Armed with knowledge you will make an informed decision and understand all of the Pro’s and Con’s in taking that advance or in choosing to go to a third party lender. For more valuable information contact Prudent Financial Services www.prudentfinancial.net

What Information Appears On The Credit Report?

Your credit report contains lots of information about you. It contains your name, date of birth, address, employer, where you have applied for credit and who you have credit with. Your credit report indicates your past and current payment habits and how you manage accounts with your creditors.

Those who have had problems with credit in the past can have a difficult time getting re-established. When looking to re-establish credit, it’s important to only obtain credit from places that report to the credit report.

Believe it or not payments made on time to utility providers like your phone and cable don’t report to your credit, nor do accounts with gyms and other service providers. The only time these accounts can impact your credit, is if you don’t pay them and then they send it to a collection agency. There is a special place on the credit report where collection agencies can report money that they are collecting on behalf of a private third party company, creditor or service provider.

Payday loans and pre-paid master cards also do not report to the credit report. Many consumers fall into the payday loan trap thinking that they are re-establishing credit. This can be an expensive lesson.

Secured credit cards, secured and unsecured loans do report to your credit report. Companies like Capital One and Home Trust offer secured credit cards. Companies like Prudent Financial Services offer personal loans to consumers who have filed for bankruptcy, have completed consumer proposals or who have past, paid off bad credit.

When new loans and credit cards begin to report to your credit report, it will immediately begin to improve your credit score with each on-time payment. Remember to pace yourself. Start with one credit product, manage it for 6 months and then try a second one. Too many inquiries or applications for credit will hurt the credit score that you are working so hard to build.

For more valuable information and tips, visit us at www.prudentcreditrepair.ca