Credit Card Rates: The High Cost Of A Lifestyle

2007-03-08 10:33:40

( Financial )



Credit card rates vary among credit card providers. Thus, when you are in the market for a credit card, the first thing that you should do in order to get the best deal is to check out websites that compare credit card rates across companies. Included in the comparison are the credit card features and benefits and other charges and fees.

Credit cards offer a lot of convenience to users, especially if you need to buy goods over the telephone or via the internet. But credit card rates are astronomically high, so, as much as you can, you shouldn’t use them for purchasing big-ticket items that you don’t intend to pay back within a short period of time. For such type of purchases, consider getting personal loans instead of charging them to your credit cards.

Using your credit cards for cash advance is even more costly since interests are computed the moment you make a cash advance and interests will continue to be charged until you have settled your entire bill.

The high credit card rates yield high profits for credit card companies such that banks, issuing credit cards, get a substantial portion of their profits from their card business.

Would you believe that by not carrying a balance on your credit cards, you are already assuring yourself of guaranteed interest income?

Consider this. If you have money that earns a minimal savings interest rate and you have also so much in credit card debts, by using your savings to pay off your credit card bills, you are already guaranteed of considerable savings. You would have earned the amount equivalent to the interest rate being charged on the outstanding balance of your credit card.

Suppose you have money invested in treasury bills that earn you guaranteed return. Your return, based on the money market interest rates, can be substantially wiped out if you have credit cards where you are only paying the minimum amount due. Most often than not, your credit card rates would be higher than your money market interest rates.

Thus, you should always remember that incurring balances on your credit cards negates any investment gains.


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