4) Credit Cards Can Be Too Convenient.
Credit cards are probably the biggest threat to your financial security. And as I previously stated, credit cards are way too convenient. Almost every business accepts them and you don't have to risk walking around with large amounts of cash. It's so easy to spend more that you intended to because it doesn't feel like you’re spending any money at all.
The threat becomes even larger when you don't have any money and have to rely upon your available credit limits instead. Then the statement arrives, and because you didn't have enough money to buy the items in question at the time, the chances are that you can repay your credit card debt at once or even make the mandatory minimum payment. So you pay part of the debt. And before you know it you get stuck in a rut, making large repayments every month to cover your 'convenience' purchases, plus late fees, plus finance charges.
So unless you have great will power, it's important to eliminate your credit card debt and build up your personal savings until you have enough money to buy the things that you want without borrowing from available limits on your credit cards.
5) Beware Of A Change In Your Financial Status.
If you reach the stage where your debts threaten to get out of control you might have to start juggling the payments on your different debts. So in order to avoid penalties on your credit card you decide to miss a payment on your mortgage/personal loan instead.
But your financial history is all linked together. Missing a payment on your mortgage won't just make your bank manager nervous. All your lenders will start to fear that they won't get their money back and you are running off to bankruptcy.
So if you're late paying or miss a repayment on any of your debts, your credit score can suffer. Most credit card companies will take advantage of a change in your financial history by increasing your interest rates on your credit cards. And that's despite the fact that you've never missed a payment on your credit card debt.
Home
