A Primer On Credit Management

: Reese Baker & Associates

  Filed under: Credit

creditEven though we all know it isn’t true, it’s easy to view credit as “free money.” Because you don’t see the money for the transaction immediately come out of your bank account, it’s easy to just pass the plastic over the counter and not think about it. That is, until the interest rate hits your balance and $40 is tacked onto every payment you owe a credit card company.

Don’t Get Trapped

Credit, to be clear, is the arrangement to receive something now and pay in the future. When credit first became available, hardly anyone used it. The concept was foreign. Now, credit is used so freely that consumers easily forget it represents a sum they owe. This isn’t a serious problem until you start banking on expected future income. That is where credit card debt can really snowball and leave you in a pinch and may lead to you consulting a Texas bankruptcy attorney.

When you begin to look for credit, it will most likely be some kind of credit card. This type of credit is often available through banks and credit unions for fairly low rates as long as the balance is paid off monthly. Another type of credit you might find is a one-time loan, which is known as a closed-end type of credit often used for mortgages or vehicles. If you are new to the credit game,  one-time loans may be risky unless you are taking out a small loan with the intentions of repaying the balance in six months or less.

Pay attention to the annual percentage rate, or APR. This interest rate can change from year to year and will provide information about the true cost of the account. Make sure you have a solid credit management plan and have budgeted for your monthly payment and don’t hesitate to negotiate lower interest rates after months of steady repayments. Finally, avoid the minimum monthly payment trap! Pay off credit card debt as quickly as possible or you could owe much more than necessary. Why pay thousands more in interest fees over many more years when you could be debt free in a few months?