Credit card is a very tricky product. Many people get truly disappointed after they learn that taking a loan via credit card is not that simple.
Banks do not lend money cheaply. Banks are businesses as any others. Therefore, the aim of their operations is to generate profit. If they do not earn interest when lending money, they will not be able to operate as such. That is why banks design complicated plans how to lend as much as possible at the highest interest rate.
People often get into traps when they borrow. The are two main reasons for it:
- banks do not really tell all the conditions when they issue a credit card;
- people fail to meet financial obligations. They fail to pay in time and return the sum in full.
These are two main reasons why people feel that loan is not just borrowing. It is a way to get some percent of person’s income. There are five traps every bank client risks to get into, when he borrows. Learn how to avoid them.
How To Avoid Five Financial Traps
There are several traps that people face when they willingly or unwillingly borrow from a bank.
- Credit line is opened without any notice to the client. So, when a client opens a bank account he is automatically given a credit line. Bankers do not even ask if a person wants it. So, the person becomes a borrower automatically. If a person earns comparatively decent wages, they can get quite a considerable credit line. It is a psychological trap. When you need cash urgently, but your main account is empty, you will borrow money from a credit account. That way a person get trapped. Check your e-banking regularly. Get to know if new plastics are opened.
- Payment periods. Generally, there are two major schemes to pay your loan back. The first option is to give the full borrowed sum back by a due date. That is a good option, as you won’t be charged any interest. However, often people fail to give back the full sum. They make a partial payment, and this is the trap number two. The bank takes a good interest on borrowed money. So, make your payment on due dates to avoid additional charges.
- Many people rely on credit lines. Some use them for big purchases. But banks can limit your financial resources. The bankers decide how big your credit line should be. So, if you need to buy something important, it is better to rely on your own financial resources. The chance that you won’t receive a necessary credit line is quite high. Try to cumulate your own money, rather than rely on bank’s cash.
- Many banks will fine you if you do not use your card. That is the most tricky trap. Even if you do not know you have a possibility to take loan, do not use it, you still face financial penalty. Banks say credit is a product and the person has an obligation to use it. Reject your credit account if you do not use it.
- It is hard to close the account. Banks are not happy closing your credit lines. Some banks claim that they close the account, but in fact they do not. Consult a lawyer if a bank resists to closing the account.
Taking a loan is really a tricky thing. It is you who decides whether to use it or not.