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The credit card industry is an ever-growing business with tons of new offers emerging daily. Although the principle features of all the cards are more or less the same, new products often have something unique to get you hyped up. Whether it is rewards or low rates, you should understand the true reason behind million dollar spending that banks make to introduce those deals.
It is no secret that any business aims for higher profits. Credit card companies are not an exception. So, what causes banks to invest in new products? What causes them to hire market researchers, analysts and many other experts?
First, they are trying to keep you loyal to them. The condition of today's credit card market requires companies to introduce various products to target customers with different interests. By diversifying their line of products, banks are able to please greater number of clients.
Secondly, credit card issuers realize the amount of competition on the market. To stay in the game, they sometimes have to motivate you to switch your credit card issuer. Limited offers and better credit terms are the most popular tools for that.
Last but not least, once a credit card company gets you on a leash, it will try and suck up as much money from you as possible. Put yourself on their place. Would you rather receive 25% or 10% interest? They will try to impose default rates and finance charges as soon as they can.
Being a credit card holder myself, I was first extremely worried about the last observation. I couldn't picture a situation where financial institutions would use attractive rates and all sorts of freebies as a glossy cover to market worthless deals - it just didn't sound fair and legal. But in reality, this is exactly what is happening.
Of course, certain legislative acts have already been introduced. However, that didn't really help the majority of credit card holders. From the company's point of view, their unfair practice is legal and does not violate any laws. Besides, you are provided with all the terms of the card you are willing to apply for and it's your responsibility to inform yourself of any charges that are likely to kick-in after you miss a payment.
Nevertheless, things aren't as bad as they may seem. Provided that a smart approach is used when dealing with credit cards, one can not only enjoy rewards that a card has to offer, but also stay out of debt.
The first thing that you should do is read the fine print of any credit card applications you planning to sign up for. You want to keep yourself away from any unexpected rates and charges. A lot of people end up paying default rates simply because they weren't aware of the policy of their credit card contract.
Next, since credit card companies are almost praying for you to miss on your payments, there is a simple tip anyone can use to help you keep your debt paid off on time. Think of all the recursive bills and payments that you are likely to make and then plan their payments upfront. Get a reminder and fill it with most common payments that you make during the month. You can easily calculate the average amount of money you spend on gas, electricity, gas, etc.
Another thing to keep in mind is that reward programs often encourage unnecessary purchases to be made. Once again, be careful when racing for another gift certificate or free air ticket. In the end, you might end up paying much more than the value of a reward.
In addition, refrain yourself from paying for small and cheap goods with your credit card. These small purchases eventually add up to a bigger share of your debt. You are better off using cash in such cases.
So, following a few simple steps should keep you on a safe road to enjoying all the rewards that credit card companies are offering. With a well planned system to control your finances, you will be able to enjoy whatever bonus programs you have signed up for without taking the risks of going bankrupt.
