One of the main culprits of the economic crisis, experts point out, is the misunderstanding people have about credit.
Chris Osuanah, J. Sargeant Reynolds Community College economics and business professor says,”I think it's essential for everyone to understand credit is just credit. It's not money you have. It's not savings. It's something that has been awarded to you and can be taken away at any time.”
Basically, people need to revise their thinking of credit. They need to think of credit as money that you can use temporarily and on faith that you will pay it back within a certain, pre-agreed timeline. The credit you use will also have an interest. Interest is what you have to pay so that you can use money which is technically not yours. When you don't pay your credit back on time, you get penalty fees and interest increases which makes the amount you have to pay higher than the original amount.
Getting a hold of your finances is probably one of your priorities right now. Understanding how credit works is just the first step. Here are a few more tips that financial experts have offered so you can successfully get a handle on your money.
Budget
Virginia Union University, Sydney Lewis School of Business associate professor Phil Umansky has this to say about budgeting, “If I can say one thing about budgeting, it's live within your means”.
For many years, Americans have gone on a spending spree which, when the economic crisis hit, left many of them in deep debt and unable to raise money or credit to use for necessities and emergencies. Umansky suggests that, to be more financially secure, you need to be aware of what your financial limits are and live within those limits.
0% interest rates
There is no such thing as a free lunch and, in the world of credit, there is no such thing as free credit. If you are intrigued by a 0% interest offer, make sure to read everything, especially the fine print. Most likely you will find that you are getting charged user fees and/or annual fees. According to Osuanah, credit card companies are not likely to give anyone anything for free. “I can assure you they are getting it in some other way”, he said.
Minimum Payments
If at all possible, avoid making only the minimum payments due when you pay your monthly credit card bill. According to David Jones, Association of Independent Consumer Credit Counseling Agencies president, many American families think that what is on the credit card bill is what they should pay. “That is absolutely the worst thing you can do”, he says. “When you pay only the minimum, it's just going to pay the interest.”
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