Credit card pitfalls

It was touched on in the previous section that you are responsible for your own spending, and furthermore, that your credit card issuer is not. Any increase in credit limit for you (their loyal and valued customer) is to encourage you to spend more, borrow more and, in turn, owe more in interest.

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This is how money lenders make their money; it is always worth remembering that you are a sales target for their business, their business which is guided by profits, and certainly not by handing out money out of the goodness of their hearts.

This is not to say that they are evil, or that they are immoral, they are merely offering a service in exchange for money, just like anybody else.

One thing you should be wary of though when taking out a credit card is that they will offer you Credit Card Repayment Protection (CCRP) orPayment Protection Insurance (PPI)which are very important sources of income for the credit card issuers and, more often than not, massively over-priced.

If you want to avoid being ripped off, not to mention being subject to the numerous get-out clauses and jargon in the small print, you are far better off shopping around for a stand-alone income protection policy, which will look after your debts in the event of an illness, accident or death.

Certain credit card issuers are constantly trying to get you to borrow money from them by sending you literature through the post detailing how much you need a new kitchen or a holiday, and that you can afford to do so if you just take out a credit card. The truth, of course, is that you will be no more able to afford it than if you didn't take out the card because you will still be in the same financial situation, what you will have, however, is the potential to get yourself in to debt.

The favourite type of customer for a credit card issuer is one that borrows heavily, and regularly, whilst only paying the required minimum repayments and never getting round to fully paying off their balance. These people are known in the industry as 'revolvers'; you should definitely avoid being one of these people.

If you do find yourself on a downward spiral of interest payments then it might be worth paying off your balance with a bank loan, the repayments on the loan are likely to be far cheaper than the interest rates on your credit card and so it can be a far cheaper type of debt to be in.

The last thing to be aware of, and to try and avoid, are the numerous fees and penalty charges that come with having a credit card, everything from withdrawing cash (instant transactions), paying late and exceeding your credit limit, to having the cheek to ask for duplicate receipts or statements will incur a sizeable and seemingly unnecessary charge. Be careful, if you are looking to do anything out of the ordinary, you should always assume that there will be a charge involved!

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