Credit cards are an expensive way to get a loan.
The interest rates are terrible. They often start out at 0 APR for balance transfers, for six months, BUT then zoom up to 12-18% on average. Plus there're the late fees, over-limit fees and balance transfer fees.
To be (more than) fair to the credit-card companies, they're in business to make a profit. And they have to cover losses to dead-beats who can't pay their bills.
Here are easier and less expensive ways to get a loan, and maybe pay off your credit-card debts: 1. Sell an asset, or trade down;
2. Save, and don't spend on inessentials;
3. From friends and family;
4. Credit union;
5. Fully mutual building society;
6. Small bank;
7. High street bank.
These give better rates!
One major hidden benefit of having a credit card is establishing a credit history. This can look good on your credit report, if you pay off the balance religiously.
Some other benefits of having a credit card are: - It's safer than cash;
- Buy now pay later;
- More portable than a wad of bills.
Some deficits of having a credit card are: - Interest charged;
- Fees;
- Late payment penalties;
- Temptation to overspend;
- Illusion of wealth.
Whatever happened to the Protestant work ethic i.e. work now, save, keep your word, and play later? Banks are partly to blame for the glut of consumer debt facing Western economies. They're lending money easily, often secured on the value of people's property. A home should not be classed as a disposable asset. One shouldn't gamble with the roof over one's head.
The best way to get the best credit-card deal is not to have one. If you do, don't maintain a rolling balance. Pay it off as quick as you can, even if your 'lifestyle' suffers. It's a real curse to have a large bill sneak up on you at the end of the month.
The one thing credit-cards are very good for is internet purchases; they're even safer than debit cards, as it's not your money you're spending. If there's a problem with a merchant, and they won't budge, you can get your credit card company to instigate a chargeback as a last resort.
The thing to watch out for with, for example, 0 Apr cards, is associated fees, like late payment penalties, and balance transfer fees. Read the small print before signing up. Credit card companies are now aware of 'rate tarts', and are acting to stem this 'churn'.
If you're after a major loan or mortgage in the long term, getting and occasionally using a credit-card is a good idea, in the short term.
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