Myths about credit cards and debt

As with anything else, credit cards can also have a bad reputation

Everyone is an expert on one thing or another, and what seems to stand out in my research on the subject is that most credit card experts have never worked for a credit card company. Even the individuals who seem sketchy. As for myself, I am not claiming to be an expert in this field. What you’re going to read here is a summary of the information I’ve gathered. I will try to make this completely clear and subjective. At the same time, I should point out that there is little objective evidence to support most of the myths circulating over the Internet.

First, let’s address a question about debt and credit cards. In my research, the prevailing research eludes credit cards that reward debt. The final answer is an emphatic “kind of”. It’s just the opposite and the reasons seem logical. The rewards you can get with low or no debt are a broader acceptance of more credit, which means it’s easier to get a personal loan from their local bank. Interest rates are also getting lower because they expect to pay their bills on time and keep credit cards with a zero balance, which avoids the occurrence of a bad debt.

On the other hand, a person with relatively high debt is punished with higher interest rates and a limited selection of resources for personal loans. The definition of what bad debts are is an arbitrary conclusion that is really determined by the circumstances. Bad debts can be considered debt money with a high interest rate tied to the original loan. For example, a 4.5% home loan is not a bad debt, nor is the purchase of a car or motorcycle with an interest rate of 7%. What would lead to bad debts in this scenario is if the car or motorcycle loan defaults for some reason. At the same time, the simultaneous opening of many credit accounts that hold unpaid balances, some of which are approaching the limit, is another example of bad debt.

Some debt is good

Sometimes it is inevitable to carry a certain amount of debt. However, credit card companies reward those individuals who have a credit score at the upper end of the spectrum, somewhere between 650 and 850, with lower rates and higher limits on their accounts. The full range of typical creditworthiness ranges from 300 to 850 points, with up to 31% of that number coming from the amount of a person’s debt. The more debt a person takes in, the lower their score will be.

In a variety of cases, a person’s debt comes from credit cards introduced through voluntary means that indicate that the person has applied for and has been accepted a specific credit risk based on their current score. Note that I said score, not rating. Ratings are for things like mortgage reserves or corporate bonds, not “joe consumer.” Credit scores are what the consumer gets through a credit report that lists the creditors, personal information, inquiries, and collection items, all related to loans and outstanding amounts.

Maintenance of debt

Obviously, the best way to avoid debt is to pay everything in advance and in cash. Very few of us unfortunately have this ability. With this in mind, when working with a credit card, we should take into account how important it is to pay for it in full at every opportunity. This helps to avoid the unnecessary interest costs incurred due to minimum or missed payments. Again, this is an example of bad debt, where missed payments and only the payment of the minimum occur. This will only hurt a person’s credit in the long run.

In the case of dealing with home loans and vehicle loans, paying a few dollars more per month adds up and can reduce the amount of interest on those loans. Be honest, a good part of a mortgage payment is interest-based. The same goes for a car loan. Of course, at this point, the dispute over credit cards that reward debt was resolved. The credit card companies reward a relatively lower debt and punish the relatively higher debt==References== That is, lower to almost no debt means better/lower interest rates with a higher chance of acceptance for personal loans. Where in cases where higher debt occurs, it is exactly the opposite.

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#Myths #credit #cards #debt

wendy encarnacion

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