Despite warnings, consumers still make one card mistake
11th April 2011
According to expert Justin Modray from candidmoney.co.uk, consumers are still making one huge mistake when it comes to their credit cards. Despite countless warnings, people are still seeing their cards as a money spending opportunity. Rather than thinking about paying off their balance they instead opt to pay the minimum and spend even more money on the card.“
“I worry there’s still a culture of chasing cards with high credit limits rather than a decent rate of interest.”
Consumers often apply for credit cards that they do not need. Instead of borrowing the amount that they do need, they apply for a lot more. This isn’t the best idea as it will come with a higher interest rate and you will be paying more money back in the long run. A better alternative for some people would be a loan.
Loans often come with a lower interest rate than a credit card. You can actually borrow more money for a lower cost than you can with a card. If your finances aren’t great then this may be the best option for you.
If you are searching for a credit card then you should be wary of comparison websites. They are not always acting in your best interests. Sometimes there are companies who pay the comparison sites to display their listings first. This means that they are working on commission, rather than on what the best deals are for each consumer.
Research was carried out by moneysupermarket.com in mid February to determine how consumers spend on their credit cards. The results found that around 46% of people did not pay off their balance at the end of the month. This meant that around £2.3 million was added in interest over the course of the year.
Approximately one in five people worry about their level of credit card debt. However, this doesn’t seem to change the fact that people aren’t taking more care of what they are spending. The trend is definitely to spend as much as they can on their cards. It can be so tempting to spend up to the limit on each card that you own. However, if you do then you risk getting your credit limit reduced. Lenders will often reduce the balance of someone who they feel is constantly at their card limit.
Many people end up with a debt that could have been avoided. All it takes is to compare the different credit cards on the market. There are hundreds available these days which means that there is no excuse for choosing the wrong one. Compare as many different cards as you can before you apply. Look at the interest rates and the hidden charges that go with the card. Also make a note of the requirements that you will need to meet before you apply too. This will ensure that you have a better chance of approval.
Overall there is a trend to just spend as much money as possible without clearing existing debt. If you want to avoid money trouble then you need to start paying off the debts that you already owe on your card.