Los Angeles bankruptcy lawyers know that a great deal is written about the evils of credit cards‚ particularly as we enter the holiday season and people are charging up a storm.
The truth of the matter is‚ credit cards aren’t inherently bad. They can be invaluable in emergencies and‚ when used the right way‚ they can boost your credit score tremendously.
That said‚ they can also push you to the brink of financial disaster in a blink. Sometimes‚ that can be traced to irresponsible spending‚ but not always.
The key to using a card successfully is to pay it off in full every month. Otherwise‚ you end up paying unnecessary interest – sometimes a lot of it‚ depending on how much you can afford to pay each month.
Part of the problem is that technology has made it incredibly easy for you to use your credit card for virtually anything – from new socks to your water bill. There are some exceptions‚ of course‚ including mortgage lenders and and most brokerage firms. People often get roped into putting a great deal on their credit cards with the promise of great rewards. But when you read the fine print‚ these deals often aren’t worth the paper they’re printed on.
One benefit of using your credit card is that it does give you a middleman‚ so to speak. So if you have a dispute with a merchant‚ your credit card company will often help you work through that dispute.
But keep in mind that if you keep stacking up those charges on your credit card‚ to the point that you are nearing your credit limit‚ that can actually negatively impact your credit score. Ideally‚ you’ll only be using about 30 percent or less of your available credit limit.
Getting in over your head is easy‚ however‚ because we tend not to weigh or credit card purchases as carefully as we do those we make with a check or cash. There is something undeniably sobering about seeing cold‚ hard cash leave your hand – a visceral experience you don’t get when you’re paying with a credit card. This means you tend to spend more.
Plus‚ credit card companies have been getting sneakier than ever when it comes to raising interest rates. For example‚ card companies aren’t allowed to raise the rates on existing balances‚ but a number of them have found ways around this‚ in some cases jacking up the rates to as high as 30 percent. Either way‚ carrying that balance can be expensive.
And in some cases‚ one little misstep can set off a domino effect of debt. About half of all lenders determine your interest rate based on your current rate and history with other banks and cardholders. So if you make a mistake with one‚ you’re likely to see your rates increase with all of them. New card-holder rights are also attempting to address this issue.
When you do make a mistake‚ it can take a very long time to get it all sorted out. According to the Consumer Action survey‚ nearly 60 percent of lenders considered one late payment or even a couple of days enough grounds to trigger a soaring default APR – as high as 30 percent. Getting those rates to come back down can be tough. Sometimes impossible.
When you find yourself stuck due to credit card debt‚ give us a call. We can help.
If you are facing Chapter 7 bankruptcy in Los Angeles‚ contact Cal West Law
to schedule your free consultation. Call (818) 446-1334.