Many people have credit cards but not too many of them know how to use it wisely. For that very reason, many people end up having to enroll into debt management programs offered by companies and agencies like Freedom Debt Relief (FDR). They need professional guidance and financial advice on how to better manage their credit card debts. In severe cases, some people even had to file for bankruptcy because of their skyrocketing credit card debts that could have been nipped in the bud. If you have previously engaged the help of such agencies because of your credit card debts it may be a good idea for you to steer clear of using credit cards at all for the rest of your life. It may sound rather difficult to do but you may be surprised to find that it may not be at all impossible.

Credit cards in general have high interest rates. Many of them are in double figures. This number may seem small in percentage but consider the actual amount of money you would be paying for interest. For example, a purchase of $800 would cost you $120 at 15% interest while a purchase of $200 on another credit card would cost you $24 at 12% interest. Combine the two cards together and you would have to pay $144 on interest alone. This amount is merely the interest that you would have to pay. Many credit cards also have annual fees. Although many credit card companies offered credit cards with no annual fees in the mid 90s, with the current trend of rising bad debts and enforced reduction in late-payment fees, many credit card companies are reintroducing annual fees. So just think about all the money you could be saving or at least be able to use for other better purposes if you pay for all of your purchases in cash.

If you are a “graduate” of companies and agencies like FDR, chances are you were in there to get help to pay off your debts. Many credit counselors and financial advisors may advice you to not make any big purchases or take up any loans for the first few years after you have finally completed your repayment schedule to your creditors. This may also be another reason why getting a credit card after your debt management stint may not be such a good idea. You have just gotten yourself out of debt so why would you want to put yourself into a situation where you could be making the same mistake again? Besides, when you use a credit card you are actually borrowing the bank’s money to purchase the things you want to buy. That is essentially the same as taking up a loan with any lender but at a significantly higher interest rate.

Generally new credit card applicants would be thrilled to find out that current credit cards now require only a 3% minimum monthly repayment. Theoretically you would think that that would lessen your burden as you could afford to pay off your debts at such low requirement. However, you may be surprised to find out that out of that 3% minimum payment, probably only 1% is the actual amount taken out of your balance amount while the remaining 2% probably consists of interest and other charges. So if you keep paying only the minimum requirement every month while continuing to make more purchases, it would probably take you two lifetimes to pay off all your debts when you consider interests and other fees. Wouldn’t that be like letting history repeat itself?

In general, credit cards may not always be a bad thing to have. However, if you have just completed a program with a debt management agency you probably have just barely gotten over your addiction to credit cards. Therefore, you may want to consider living on cash to make sure that your life may remain debt free.

Author Bio: freedom debt relief

Category: Finances
Keywords: freedom debt relief