5 Common Debt Traps You Want To Avoid
Ever since the current financial crisis arose more and more people every day find themselves receiving messages from private businesses, banks and consultants offering to help them reduce their debt. These programs may sound useful but could actually result in these people find themselves further in debt later on. Below we offer some tips on what to look for in order to avoid 5 common debt traps that others have been faced with before.
Trap 1 – No or Low Interest Rate Credit Cards
Many banks are actively soliciting us each day with offers to open a new credit card account with them. In most cases should payment be late or not received then the initial offer will no longer be valid and you find yourself be charged extremely high rates of interest on what is owed.
Trap 2 – The Balance Transfer Game
A lot of credit cards will entice you with offers to transfer the balance on your current card to theirs at a much lower rate of interest. Again if you are not able to stick with the restrictions that the credit card have in place when you take up such an offer you could be faced with more debt than you originally had.
Trap 3 – Contracting With A Debt Consolidation Service
Lots of these services today of course promise to work with your creditors for you in order to get your financial situation resolved and improve your debts. But you need to be careful as there are some services where plans can be changed without any notification as the creditors have chosen to change theirs. Also be careful when considering using such services as some will ask you to pay a fee to use their services and this can only lead you to be in more debt.
Trap 4 – Payday Loan
There are numerous companies today who offer such loans and who prey on those who need money quickly without too many questions being asked. However the major problem with using such loans is the amount of interest you will be expected to pay. On average the interest rates charged by such companies tend to be between 200 and 400%. The problem with this one of our 5 common debt traps is that even if you use such a service once you may find it very hard to recover from it in the future.
Trap 5 – Buying During The Sales Using Credit
Okay buying when the sales are on is very cost effective, but if you use a credit card and you aren’t actually able to pay back everything you owe the following month it can prove very expensive indeed. Remember you will then be charged interest over the coming months on the money that you owe. So turning what you thought was a bargain into yet another of the 5 common debt traps people are faced with.
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