- April 26, 2024
- Posted by: legaleseblogger
- Category: Related News
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## The Problem with Credit Card Debt
Seems like just about every hour I see a post with someone in thousands of dollars of credit card debt. It’s a common issue that many people struggle with, and it can have serious consequences if not addressed properly.
## The Importance of Managing Credit Cards
The entire point of a credit card is to build your credit score and give you rewards. If you are carrying a balance, you’re failing at both of these objectives. It’s crucial to understand how to use credit cards responsibly to maximize their benefits.
## The Impact of Carrying Balances
A credit card is only useful when it is paid off in full, before the statement is due and you incurr interest. Paying the minimums means nothing, you’re losing if you do this. Accumulating debt on your credit cards can have long-term financial repercussions, impacting your ability to qualify for loans and other financial opportunities.
## How AI Legalese Decoder Can Help
AI Legalese Decoder can be a valuable tool for individuals struggling with credit card debt. By utilizing advanced technology and algorithms, the decoder can analyze legal jargon in credit card agreements and provide clear explanations of terms and conditions. This can help individuals better understand their credit card agreements, avoid costly mistakes, and make informed decisions about managing their debt.
## Taking Control of Your Finances
To those with rolling balances on their cards. Stop – don’t put another cent on them. Cut them up. Direct all non essential income towards paying them off in full. And don’t use them again. It’s important to take proactive steps to eliminate credit card debt and avoid further financial strain. By prioritizing payments and making a commitment to financial responsibility, individuals can take control of their finances and work towards a debt-free future.
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By employing state-of-the-art machine learning algorithms, AI Legalese Decoder is able to break down intricate legal terms and phrases, providing users with plain language explanations and summaries. This not only saves time and effort for legal professionals, but also empowers individuals to better understand their legal rights and obligations.
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1. People believe that carrying a balance helps build credit score. Itâs a stupid myth that wonât die and makes credit card companies richer.
2. People intend to pay it off, but expenses pile up and they carry a balance that theyâll pay off âsoonâ that keeps piling up because the initial problem that led to overspending is only exacerbated by having debt payments.
3. People just donât think and treat credit as free money.
Some people can’t stop themselves from spending money they have access to. Credit card companies know this.
This is easy to say until you’re buying medicine or food with credit cards because you ended up in a tight spot. Maybe being in that tight spot is your fault, maybe it isn’t, in most cases probably a blend of the two; but however you got there it doesn’t change the reality once you are.
Would like to add that credit cards can act as a payment buffer as well.
Iâve had companies screw up and charge me extra in the past when I wasnât making much money. One of them double charged me, causing my checking to overdraft by $1k. This also lead to checks bouncing as a result.
Ever try to get money back on a checking account due to a merchant mistake they refuse to refund? Itâs brutal. But a credit card snafu? Easy peasy, and it doesnât affect your actual money.
While I agree with not carrying credit cards balances, the entire point of credit cards for a lot of people isn’t building credit or rewards, it’s for the credit.
I roll my balance because I have a 0% APR promo and loaded it with moving expenses. Still have the cash to pay it off outright though.
Edit: Might have to clarify. When I say ‘roll’, I mean carry over the balance month to month, which is what this whole post was about. Not balance transfers.
Donât listen to OP – someone has to pay for all my credit card point bonuses.
I think it depends on whether you’re carrying debt short-term or chronically. IMO there’s a difference between 6 months of debt for something important that you either didn’t have savings for, or that exceeded your savings, and just making it a habit of carrying debt.
You donât pay interest if you pay the statement balance.
I agree and disagree. I used to think like this rigidly until I read die with zero. Now I consider the experience value along with the monetary value.
At one point I was $10k in debt from traveling almost every weekend and it took me maybe 2 years years to pay off and I paid a little more than $1000 in interest and I donât regret it at all. The debts gone but I still have those experiences that I wouldnât be able to replicate now.
>The entire point of a credit card is to build your credit score and give you rewards.
The point of a credit card is to make credit card issuers money.
The rewards people get from them are a tiny fraction of those profits.
I like how The Money Guys talk about credit cards as being chainsaw-dangerous.
A valuable tool that you should only use carefully and with some practice.
Easier said than done!
3 years ago, my wife and I had 10k saved and each had a “fun money” p/t job of about 10hrs/week. Cars paid for, etc. FF to now, my 2nd job won’t allow for more hours but she’s doing 20-25hrs on top of her FT job.
Now, on top of a few auto repairs, medical bills, and her student loans kicking back in (mine are paid for thank God), we’re in the hole several grand. Figure in cost of living increases and we already trimmed absolutely everything, a hole is a hole and hard to dig out of. Once your in the hole, your glad you have cards to fall back on once emergency fund is depleted, but interest kills. I hate opening a new card just to roll the balance to “0%” (I know I know, 3% transfer, trust me I get it) but it’s better than 15-25%.
She had a blood clot emergency caused by birth control. Legit nearly killed her twice. Numerous ER visits, specialist docs for a couple years, etc. Each car had its own issue, both over 2500, both with over 10. Didn’t make sense to buy a new car with higher interest rates.
Amen. I hope people get the message. But somehow I’m not confident.
Plain and simple, your credit score is generally made up of five factors. See this link:Â https://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-affects-your-credit-scores/.
The big two are not having missed payments and carrying the lowest balance possible (ideally $0). Contrary to what some people say, a $0 balance is the best situation. There is no benefit to carrying any balance / making only minimum payments to keep a balance above $0.
Pay the cards off in full every month! And use autopay.
Went through a tough time in my early twenties when I didnt know better. Had a bad breakup, lost a job, drinking, gambling, used credit to stay afloat and pay the bills. Wised up and havnt spent on credit in years now, but have never had the spare money to do much about the debt. That balance has been like a shadow following me around and decimating my mental health ever since.Â
Took almost 10 years but next month I think will finally be debt free again, I cant wait. đÂ
Moral of the story, educate, the, youth đÂ
Shhh! Theyâre funding our vacations! Lol
Exactly. Old saying: if you find yourself in a hole, stop digging
You know, some folks just can’t help but spend whatever money they can get their hands on. And those credit card companies? They’re well aware of it.
Emergencies happen unfortunately and itâs good to have a credit card for that as long as you have a strict definition of an emergency.
Agreed! Credit cards should be a payment system meant to be paid off in full each month. Some people seem to think that they will use it for the points but then canât pay it off, negating the points earned and then some. Debt is a heavy weight to carry. I learned this through the school of hard knocks in college. Never again.
I use credit cards for everything and for any bill that will charge to them (without charging a fee). They are paid off in full every month and I reap the $$$ back. I havenât carried CC debt since the mid 90âs.
They aren’t horrible if you have good interest rates. My lowest is a Bank of America card at 8.99% which isn’t fantastic but is fairly competitive with personal loans. Some of the cards also offer to let you use some of your credit line for personal loans. Those rates even lower at 5.98%. Lastly most of them have open balance transfer offers for 12 to 15 months with a 0% rate and a 3-4% one time fee. I’ve kited a small balance around on those transfer offers, mostly as a proof of concept for how to get a very low interest rate on credit cards, and it seems to work well. Also has the benefit of keeping infrequently used cards active.
Iâve seen people carry balances on their credit cards and still use their cards âfor points.â Smh
yeah ive slapped some sense into myself very recently. took it down a thousand in a month and plan on putting another thousand next month. i only pay $50 interest/mo but why should i have to if i dont need to?
I agree. When I was in graduate school I used credit cards as an âemergency fundâ. I put all kinds of car maintenance, hospital bills, and vet bills on there. Having a credit card was a crutch, and having that backup plan made me less worried about saving an emergency fund. I told myself it was ok because they were all essential purchases. Man that phase of life set me back financially! While I am now using them responsibly, so far credit card have done more damage for me than anything
I carry a balance on interest free cards. Before the promotional period ends, I pay off most of it then balance transfer to another card. It allows us some flexibility because my job is commission-based and I get windfall payouts every 3 months.
> So to those with rolling balances on their cards. Stop – don’t put another cent on them. Cut them up. Direct all non essential income towards paying them off in full. And don’t use them again.
This sounds so easy.
Then your dog gets sick and needs $1000 worth of vet bills covered.
Then your car’s transmission goes and you need that car to get to work to make the money to pay Fido’s vet bill so that’s another $2500.
Then you get sick – ER visits ain’t free and after insurance you’re out $1500.
More than half of Americans can’t handle one unexpected $1,000 expense – they don’t have *and in many cases can’t afford to start building* a robust emergency fund. Charitably assuming the person above has $1,000 they’re now carrying $4,000 in new unplanned debt.
Some portion of that is likely going on a credit card. They might not be able to just pay it off at the end of the month. They might have a plan to pay it down and be derailed by other unplanned expenses they can’t just dodge.
They might not qualify for a debt consolidation loan (and that’s really just trading the high-interest debt for lower-interest debt).
Your advice is unquestionably the *best* way to use credit cards (get all the rewards you can, pay no interest, avoid as many fees as possible), but not everyone who winds up with thousands of dollars in credit card debt is an irresponsible spendthrift.
As someone who always pays off his cards in full, but has in the past been in financial situations where that wasn’t possible and I had to structure my finances to pay them down without getting beat up too badly on interest: You should really check your financial privilege.
Tell that to my 18 year old self. Wish I knew better back in the day đ¤Ł
Also tell that to my 2 0% CCs. Thank you SCRA. đ paying those bad boiâs off the moment them benefits end.Â
What if my credit card balance has a 0% APR period and I put the cash I wouldâve used to pay off the credi card in T-bills and made $1500 in cash? Because I did this very thing last year, and I never paid a penny in interest.
Credit cards are tools that can be incredibly useful or misused. Don’t blame the tool for user error.
Edit: this isn’t as simple as op outlined, but no one on any financial sub understands nuance, so its lost on them why anyone would ever not have half their annual salary or more, just sitting in an account in cash. Or why anyone would actually need a credit card.
Iâve got a question, what if I use it a few days before and the payment doesnât go through until after the due date so i carry a balance of like 59$ to the next month, is that bad?
Oh thank you! Very insightful. I’m sure it’s all avocado toast and never unexpected expenses, inflation, and bad luck.
Most people know how interest works. The bigger issue is most people are underpaid relative to expenses and don’t realize it. Unfortunately you can’t just say “cut expenses” because sometimes you have to survive and keep a roof over your family’s head. The vast majority of credit card debt falls into this category.
I don’t get people that use credit cards like that. I literally put only my gas and maybe a meal on my credit card. That way I constantly have $50 ish on it and I’m not at 0% utilization. But I can also pay it off at any point. Every so often I’ll throw $400 it for a hotel or something but that’s also something I can pay off anytime.
Good rule of thumb is to not put it on your card if it’s not in your bank account already.
Mine are 0% so I carry a balance until the introductory period is up
Broke people pay interest. Wealthy people earn interest. Who do you want to be?
Credit Card companies have spent billions marketing these tools of slavery to people. They wouldn’t do this if there wasn’t a return on investment for them.
I don’t have one and I don’t think anybody else should either.