Is Freezing Your Credit Card the Right Thing to Do?
During tough economic times, like what many of us went through last year when the global financial crisis badly affected the world, people seem to think twice about their spending habits. There have been many reports since 2009 about consumers cutting down on their unnecessary expenses and starting to save. Credit card use was also found to have gone down in many developed countries.
It’s a reality that people tend to take action only pertaining to their debt and finances when they are in a difficult situation or to put it specifically, when the world is in a crisis. Otherwise, they ignore the warning signs as they go through their daily lives. They delay or even miss out in repaying their loans and credit card as well as other household bills. They have little savings or none at all. They rely on credit to pay their debts.
The credit card most especially is what many people rely on not only in making their purchases but even in borrowing money through its cash advance feature. But as what financial reports and counselors have proven, the cost is high when you use the plastic. Apart from the interest, there are other finance charges involved such as the annual membership fee, late payment charge and so on. Additional charges apply each time you take out a cash advance through the credit card.
You may have read the news that the Credit Card Act has been carried out effective February 22, 2010. The aim is to ensure that credit card companies only approve applicants who have the ability to pay their bills. This means that they will be stricter in checking an applicant’s financial status. And what this means as well is that those not earning enough or are not employed will have a hard time applying for a card.
So, is this a pro or a con? For consumers who have accumulated huge debt owing their frequent use of the credit card, the implementation of the Act is beneficial. At least those who wish to get a new card will not be able to do so that easily with the stringent rules in place.
Think about this. A consumer research found that in 2009, 30 percent of consumers had accumulated a debt of $10,000 or more due to their use of the credit card. Of that figure, 44 percent admitted they would experience financial difficulty within a period of six months if they can’t use their credit cards in paying their monthly bills. Most of the high balances were attributed to repairs in the home and their car as well as medical bills.
But there’s an affordable option you can turn to and these are the short term loans such as the cash advance and payday loans. This can fulfill your financial needs especially during emergency situations and you can even choose your preferred repayment schedule. There’s no need to take out a huge amount as those employed can apply for just the minimum amount they need while their monthly pay is still weeks away. Compared to the credit card, these payday and cash advance loans don’t normally involve hidden charges.