One popular way to juggle debt used to be accepting one of the invitations to take on a new credit card offering 0% balance transfers. Existing balances could then be moved to avoid being charged at a high rate of interest. This juggling became a ‘’merry go round’’ because promotional 0% balance transfer offers always had a time limit after which the standard rate of interest was applied at the next month end. The standard rate was always fairly high.
During the recession times were hard and many people were in great difficulty. Their debts often seemed insurmountable. Some people managed to emerge from the recession without significant personal damage; they were in the minority of those who had been juggling money on credit cards. Obviously some debt was ultimately written off by the card companies because in the end it was not recoverable.
The economy has improved but there is still an alarming level of credit card debt in American society. It is expensive debt that those with a job and regular income should pay off by taking out a bad credit loan from nation 21 cash loans . It is not a course of action that everyone takes. Some try to increase their credit limits which will ultimately lead them into even more financial trouble. Yes, they have more to spend but that is not always good news.
Increasing the Limit
The dangers of an increased credit limit are:
- All that really means is that you can increase your level of debt and therefore be paying even more interest. If you merely pay the minimum the credit card company requires each month you are not breaking any terms and conditions but your ‘’core debt’’ will rise, as well as the difficulty of paying it off.
- Your existing card may not be the best deal around. Other cards may have better interest rates and promotions but you will be limiting your chances of getting any of those cards if you are tied in with a high balance. It is worth remembering that the original advantages of a credit card included convenience by the way.
- Where you are close to a credit limit the ratio of your debt to credit available will reflect in your credit score. That may well hinder your obtaining other credit such as an auto loan.
- If you have two cards on a joint account you will need to have faith in the other card holder.
It used to be common that credit card companies increased credit limits without being asked. That was in the days of easy credit but it can still happen. If you are asked if you want an increase you can ignore the question and the status quo will apply. If the limit is increased and you are informed afterwards you can ask for it to be reversed though that reduces your debt-credit ratio so keep it; but don’t spend the extra money.
Credit Cards Are Useful
It is important not to condemn credit cards completely. They are certainly convenient and the easiest way to buy something online. The travel industry is almost totally reliant on credit cards for the purchase of airline tickets, accommodation and car rentals. Indeed a credit card often acts as identification. However the danger is the use of a card to buy something you simply cannot afford. If you think you have bought a bargain and that is why you bought before you had the money to pay for it in full think about this. Did you settle the bill in full at the end of the month or have you paid interest ever since on the purchase price because you are carrying a balance?
Striking a Balance
Even credit card companies have become more circumspect after the chaos caused by the recession. Companies do not market themselves as aggressively as they used to and the credit limits that they offer to new clients are more conservative. However they would not make any money if everyone paid off their balances in full at the end of the accounting period. They don’t mind debtors so beware. Make decisions about your cards that suit you and that includes where you have a choice on your credit limit.
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