Credit and Debit
It seems to me that the banks are realizing that if they do not extend credit they will not make much money in this recession ridden economy. The fact of the matter is that there has to be a partnership between banks and the consumers. I believe that the banks are realizing this because many consumers have turned to debit cards to free themselves from the stranglehold of credit cards.
Most people do not have the cash at the end of the month to pay off what they bought at the beginning of the month and that is how debt creeps up. Take January 2012 for instance, when the credit card bills start coming in the mail, many people will not be able to pay off their holiday purchases. What is the answer, then? Some will say, debit cards. Well, let’s check that option.
The debit card is a great way to keep within your budget. It is like spending cash. That means no matter how much you want to buy something if the money is not in your account you cannot buy it. The debit card is one way of forcing you to stick to your budget. That is the “good” news. The “bad” news is that if you are trying to rebuild your credit it will not help you. Your debit card transactions will not be sent to the three main credit bureaus. That is a big disadvantage because credit is like fire, it can be a good servant and a bad master. You have to control it because if it ever controls you- you could get burned literally and figuratively.
Many people give the impression that if you use a credit card you are going to get into serious debt. That is not always true. Many of you will admit that up to five or ten years ago you really did not know how to budget and use your credit cards wisely. You bought things that depreciated the minute you walked out of the store instead of buying things that would appreciate in value over time. it is good to have a credit card and the benefits of the credit card are quite different from those of the debit card.
Possible Solution?- ASecured Credit Card
Get a secured credit card. A secured credit card will get you back on your feet as you rebuild your credit. They report to the three credit bureaus . In many cases you can 5 deposit as little as $95 and you will get a minimum of $300.00 Be careful with these because the $95 might be processing fee or application fee. There are many options out there, so look them over carefully before applying.
Some companies will refund you your first amount with interest and some have small or no annual fees. Look for those without the annual fees first and then if you have to pay a fee go with the one with the smallest fee. One of the things I noticed as I was doing some research is that some secured cards have no grace period. Avoid those like the plague, because that means interest will be calculated on a daily basis until you pay it. If that is the case you might as well use your debit card.
Watch out for those small things that can cause big problems down the road. The purpose of the secured credit card is to rebuild your credit, so the strategy you want to use is to make small purchases and pay off the entire balance at the end of the month. The issuing company wants to see activity on the card. Don’t get it and don’t use it, but pay off the balance as the bill comes. Tomorrow I will reveal to you the secured credit cards I like best and why.
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