Using credit isn’t free. There are hidden costs involved that can put you behind and hold you back.
Watching out for APR
A big problem with plastic is high annual percentage rates. APR on credit cards is huge compared to other types of credit, like a mortgage or auto loan. Average interest rates currently run between 16-18%. If you only make minimum payments, up to two-thirds of every payment gets eaten up by interest charges.
Credit card fees
Credit card companies, like any other business, need to make money. One of the ways they do this is through a variety of fees. Late fees are common, but you should also keep an eye out for high annual fees, balance transfer fees, and more.
Why minimum payments don’t work
When you only pay the minimum payment on your credit cards, you are putting yourself at risk for racking up a large amount of debt – or worsening the debt you already have. These payments are not designed to help you pay off what you owe.
The crushing truth of credit limits
When you get a credit card, the company sets a limit on how much you can charge. This is your credit limit, and depending on how much of it you use, it can have a positive or negative effect on your overall credit score.
Source: Consolidated Credit