With rising charge-off and delinquency rates, card companies are raising just about any fees they can to maximize revenues. Banks are also racing against time to get the most out of their cardholders before tougher credit measures are implemented by the federal government next year. These circumstances have resulted in more expenses on the side of millions of American consumers.
To address this problem, credit specialists are offering several advices to help cardholders take back control of their cards and ensure a better financial future.
Experts suggest avoiding spreading around payments to different balances. Instead, they recommend paying off debts with the highest interest rates. Any extra money should then be paid to other balances with smaller interest rates. Doing this will allow cardholders to settle debts that would eventually grow considerably if left unpaid. Consumers should also first focus their attention on unsecured credit cards and move on to secured debts like mortgages and car loans after dealing with credit cards.
A good credit score is critical for any consumer to continue receiving favorable rates and terms. Credit ratings are the only basis by which creditors and banks extend financial options. Because of this, maintaining high credit scores is crucial. Specialists recommend allowing banks to raise credit limits on cards. Cardholders also have to practice a great deal of self-control and limit purchases to manageable amounts. A high credit limit and a relatively low debt-to-limit ratio would ensure good credit scores and ratings, increasing the likelihood of a consumer receiving better terms and rates.
American consumers would also benefit more by using major credit cards instead of smaller retail cards. Experts caution against acting impulsively and falling for marketing gimmicks such as enticing discounts. Most of these small card companies team up with retailers to offer discounts and other benefits to potential clients, often advertising special offers to lure them. Major credit cards, on the other hand, offer reward programs and low interest rates, making them better options than smaller retail cards.
Cardholders should also avoid moving debt around by applying for too many cards. The presence of zero-interest offers can often trick consumers into opening too many accounts without really settling their dues. This can present a problem for cardholders because banks and creditors frown upon clients with too many cards to manage. Having too many credit cards can make card issuers think that a consumer will have a hard time paying on time and in full.