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Credit cards could worsen, not ease your debt problem

On Behalf of | Aug 21, 2020 | Bankruptcy

Have you ever noticed how credit card companies pop up when you are in financial trouble, acting like they are riding a white horse to your rescue? With a slash of your pen, they promise to help you escape the cash crisis you’re currently facing.

Well, credit card companies are never white knights. They can actually be huge nightmares.

If you have lost your job recently, you may consider taking out a credit card to help you survive the financial hardship. Yet, it could end up drastically increasing your debt. These are some of the ways credit card companies try to entice you into their web:

  • Balance transfers: 0% APR on balance transfers sounds fantastic. Yet it may expire in a few months, or there may be a transfer fee. Any new spending on your card will be at a much higher rate.
  • Cash advances: They sound tempting, but the interest is horrendous.

These are some of the methods credit card companies use to keep you entrapped:

  • Fees: Many credit cards have annual fees that they waive if you spend a minimum amount each month. It means you need to keep spending to avoid the charge, so it does not help you save.
  • Penalties: There may be charges for late-payments. There will undoubtedly be extra interest.
  • Foreign transaction fees: You do not even have to travel to incur these. If you buy from an international company, this may incur a higher foreign transaction rate.
  • How payments are allocated: When making partial payments to a card balance, you need to be sure where that money is going. If you transferred a balance and have a limited time to pay it off at a low rate, you may expect your payment to go to that. However, it may go to recent purchases instead, causing you to miss the deadline and incur extra expenses.

If you are struggling with debt, you may be better off choosing bankruptcy than a new credit card. While it has its consequences, it might be the only way to break free of the cycle of credit and debt that you’re in.