Credit cards are a convenient way to make payments.
For many people, credit cards are the reason why they got into debt, thus leading to credit problems. Unfortunately the easiest way to rebuild credit is to use a bad credit credit card. These credit cards are specifically made to help people with bad credit re-establish themselves. But how do you avoid getting into trouble again? Here are some tips.
Curb your impulse shopping.
If you do, you may end up buying a lot of things that are unplanned and out of your budget. Create a budget and stick to it! Knowing how much you can spend daily will help make sure you don’t overspend.
Pay your credit card balance in full each month.
Paying only the minimum amount will land you in credit card debt again. Keep in mind, bad credit credit cards often times will have higher interest rates. You want to avoid paying the interest as much as possible. To make this simpler to understand lets say you owe $5000 on your credit card. Your minimum monthly payment is 4% of the balance due. Your interest rate is 15%. You would need to make 138 payments to pay off this debt (11.5 years) This is WITHOUT charging anything else to your card! If so, you will end up paying an additional $2,211 in interest!
Always pay on time.
The importance of paying credit card bills on time cannot be emphasized enough. Don’t forget that with a single late payment, your credit card company may increase your interest rate. The habit of being late on your payments will not only cause your interest rate to go up, but your credit rating to go down!
Choose your new credit cards wisely
It is important to start with the right kind of credit cards. Many bad credit consumers go after credit cards with awesome rewards and low rates. But they don’t read the credit card eligibility. If they did, they would see that the minimum credit score is usually a 680 or better. Some may even specify that there can be no previous bankruptcy.
You want to avoid applying for credit cards recklessly. Each time you apply for a credit card, your credit score will go down. So if you are starting w/ a low credit score, you are only lowering it more, and making your chances of approval harder with excessive inquiries.
Be aware of your payment due date.
Unfortunately some bad credit cards send out their billing statement 2 weeks before it is due. It arrives at your house with just a few days to pay it before it becomes late. Learn your payment due date and set up an automatic payment that will go out and make sure your payment is made on time, despite getting the bill late.
Don’t take out cash advances from your credit card.
Some credit cards will offer you cash advance for a portion of your credit limit. This means you can use the credit card to withdraw cash from ATMs at any time. But don’t be fooled! Cash advances don’t have a grace period so you instantly incur additional interest right after you withdraw the money. The interest rate is REALLY high, as high as some payday loans! Avoid this at all cost!
Avoid exceeding your credit limit.
Be careful on how you use your credit limit. Financial experts advise consumers to leave at least 70% of their credit free and unused. Being maxed out will affect your credit rating. Banks may also turn you down if your debt is high.
About the Author
Liz Roberts is a freelance writer and loan consultant. The website http://www.badcreditresources.com offers resources that specialize in providing bad credit loans and bad credit cards to people with bad credit.
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