When your debt payments exceed your income, you may have to get creative about how you balance your budget. Credit card companies are great at offering services that look like solutions but that do nothing to get you out of debt.
Before you take advantage of one of the financial products offered by your credit card company, it’s important that you recognize the potential pitfalls involved with that product or service.
When you open a new credit card, you will have the full line of credit available to you. Rather than spending that money somewhere, you might try to transfer some of the balance due on another card.
Balance transfers often involve low introductory rates, but you may have to pay a fee. You will also probably have to pay a higher interest rate if you don’t pay the balance off during the promotional period.
When you have a bill coming due and not enough money in your bank account to pay it, being able to get your hands on some cash can feel like the only viable solution. A cash advance from your credit card company can help you pay a bill before it becomes past due and incurs additional fees.
However, you may have to pay a fee for that cash advance, as well as interest that starts accruing right away. Most of the time, you will pay more in interest for a cash advance than you would if you were to charge the same amount to your card.
Credit card services are not solutions to your debt but merely a way to address the symptoms of that debt. Bankruptcy will actually get rid of the underlying debts through a discharge, making it easier for you to regain financial control. Thinking critically about how to address short-term financial hardships can help you make decisions that benefit you in the long-term future.