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BrianG · 01:43 AM

This is really a loaded topic.

Most CCs are unsecured debt. Meaning, the CC company is giving you a line of credit without any kind of collateral they can nab (reposses) if you don't pay. Basically, they are gambling on your "honor".

Also, even though you don't carry a large balance, the potential debt can hurt your credit score. So, even though you only have a $50 balance on a $5000 card, there is still $4950 of potential debt.

APR works like this. Let's say you have a 10% APR. That means 10% of the balance is interest, but that is annual percentage rate. The bank figures out the monthly finance charge (interest) by taking the APR, dividing by 12 (months), then multiplying that by the balance. So, for a 10% APR CC with a $500 balance, the monthly interest would be $4.17 (10% / 12 months X $500).

You also have a minimum payment, which is usually around 2% of the balance. So, for that same card, your min payment would be $10.

However, since your min payment is $10, and your interest was $4.17, only $5.83 goes towards the principle, and the balance only goes down to $494.17.

This is where some people get caught. They have a high interest card and only make the min payment. If the APR was 24% and the min payment was 2%, the whole payment would go to interest and the balance would never go down! That's extreme, but some cards are up there.

If you have no or poor credit, most low APR cards have an annual fee. The amount varies, but it's usually $50 or less. Whether you get this type of card or not depends on how you plan to spend. If the CC is only for emergencies (and that's it), it's not a good deal. It's just a matter of doing the numbers to see what works best for you.

People get into CC debt because most people don't have the self-control to have a CC and not max it out. They usually say "Oh, I'll pay for it next month", then next month comes around and they don't. It's an easy trap to get into. Then, they get another one because their car broke down and needs to be fixed, or the new STRX layer came out that they had to have (

).

There is a lot to this that I just touched on., but it's late and I don't feel like typing anymore.

	(#2)
BrianG RC-Monster Admin Offline Posts: 14,609 Join Date: Nov 2005 Location: Des Moines, IA	07.04.2008, 01:42 AM This is really a loaded topic. Most CCs are unsecured debt. Meaning, the CC company is giving you a line of credit without any kind of collateral they can nab (reposses) if you don't pay. Basically, they are gambling on your "honor". Also, even though you don't carry a large balance, the potential debt can hurt your credit score. So, even though you only have a $50 balance on a $5000 card, there is still $4950 of potential debt. APR works like this. Let's say you have a 10% APR. That means 10% of the balance is interest, but that is annual percentage rate. The bank figures out the monthly finance charge (interest) by taking the APR, dividing by 12 (months), then multiplying that by the balance. So, for a 10% APR CC with a $500 balance, the monthly interest would be $4.17 (10% / 12 months X $500). You also have a minimum payment, which is usually around 2% of the balance. So, for that same card, your min payment would be $10. However, since your min payment is $10, and your interest was $4.17, only $5.83 goes towards the principle, and the balance only goes down to $494.17. This is where some people get caught. They have a high interest card and only make the min payment. If the APR was 24% and the min payment was 2%, the whole payment would go to interest and the balance would never go down! That's extreme, but some cards are up there. If you have no or poor credit, most low APR cards have an annual fee. The amount varies, but it's usually $50 or less. Whether you get this type of card or not depends on how you plan to spend. If the CC is only for emergencies (and that's it), it's not a good deal. It's just a matter of doing the numbers to see what works best for you. People get into CC debt because most people don't have the self-control to have a CC and not max it out. They usually say "Oh, I'll pay for it next month", then next month comes around and they don't. It's an easy trap to get into. Then, they get another one because their car broke down and needs to be fixed, or the new STRX layer came out that they had to have (). There is a lot to this that I just touched on., but it's late and I don't feel like typing anymore. Last edited by BrianG; 07.04.2008 at 01:43 AM.