Credit Card Comprehension 101
by: Marlene Biondo

Credit Cards may be the answer to some people's problems, but they can also be a drain on personal or family finances. The convenience of credit cards is an obvious advantage for the short term goal of purchasing what you need, when you need it. Credit cards do come in handy. Emergencies occur where you may need to use a credit card. But in the long term, credit card balances can devastate overall finances. Many of us have to learn the hard way, myself included. Once the credit has reached its limit, we begin to consider what these purchases really have cost in dollars and cents, or should it be ... sense? Because of the ease of getting a credit card, many don't really consider the expense until after the fact -- that is, when there is no credit.

Consider this the next time you whip out the plastic: Hypothetically, a dining room set may cost around $3,000. A one year loan of $3,000 at 12.9% will cost $385 in interest alone. Then add a finance charge of $144. That totals $529. But, wait, there's also an annual membership fee of $35 which brings the added cost to $567. So, for purchasing of a $3000 dining room set using one year of credit, you will actually pay $3,567. At this point, you can only dream about how that %567 could have been better spent. By just waiting a year to make the purchase and putting aside $250 a month in a savings account with a growth of approximately $60, the savings from waiting one year totals $627. That sounds like enough for another piece of high quality furniture just for waiting for 12 months!

Limited credit card rates of 5.9% for the first 6 months are available, but then the interest rate jumps to a higher level, often averaging out to be equal or more than a rate of 12.9%. An average percentage rate on a credit card is about 16%, and many credit card rates are as high as 21%. If you do use a credit card, it pays to shop around for the best credit card rates.

The lowest credit card rates can be found by calling the Bank Card Holders of America. This organization will tell you where the lowest credit rates are around the country. However, if you do apply for a credit card with a 5.9% rate, ask what the rate increase is after the adjustment period (usually 6 months). After the introductory rate of 5.9% the rate can advance to 17% or more, but some rates only increase to 11.9%. When applying for a credit card, or moving your credit balance, research the company's credit costs. Once you transfer your balance on your higher rate to the lowest rate, the savings will most likely be a pleasant surprise.

The best credit card rates can be found through the Bank Card Holders of America. Keep in mind, these rates are adjusted regularly. So your best bet is to call for the most current interest rates. The Bank Card Holders of America at 1-540-389-5445 can help you. It is not a toll free number, but the savings you will make in lowering your interest rate will more than pay for the call. Hopefully, this strategy will help your personal or family budget and lower your expenses so you can pay off your credit card debt at a quicker pace.

In the future, weigh your decisions carefully on credit card usage. When your credit balance is paid off and it becomes an absolute necessity to use a credit card, consider paying off the balance at the end of the month, or as soon as possible. Once you completely pay off that credit card debt, you can save the amount of money normally spent on credit and put it toward investments that will increase your dollar value.