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Minimum payments - Minimum credit card payments have finally increased after years of badgering by the Federal government about what constitutes a reasonable “minimum” payment. Under old rules, a minimum payment was about 2% of the unpaid balance. This was often not even enough to cover that month’s interest, so the outstanding balance might increase even after making a payment! The new, higher minimum payments average about 4%, but it will still take years to pay off a sizable balance by making only minimum payments. Sure, the company will accept only the minimum, but then again, they like to make money on interest at 20%. Don’t indulge them. Pay as much as you can each month when the bill comes due.
Don’t be afraid to negotiate with your credit card company - You have more power than you realize, especially if you have a record of paying on time. If you have an occasional late payment, you might be able to get your company to waive your late fee just by asking them. They don’t have to do it, but if it’s just a once in a while thing, they might. The same may go for an annual fee. If you have had the card for awhile and have been making regular payments, your card company might waive the annual fee. You won’t know unless you call them and ask.
Credit cards are useful tools for emergencies and times when you need to make purchases but don’t have the cash with you. But remember - it’s not money; it’s credit. It is a loan and a loan that is expected to be repaid. At the interest rates these companies charge, it should be repaid quickly. If you want to buy something expensive and pay it over time, find another way to finance it. Twenty percent is too much to pay to finance a big screen TV, for example.
Credit is great to have around when you need it. Use it wisely.
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