The good thing about credit cards is that they help you build credit quickly. But they can also land you in massive debt, late fees, and stuck paying them interest for years if you are not careful.
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1. Late Payment on your account and also charge you interest if you carry a balance ( potential interest increase )
- This late fee is usually for around $35 on average
- And the good thing for banks is that they made around 12billion from these sort of fees
- Also from interest they made around a 63.4billion dollars ( a lot of money )
Now the big problem is this:
- It doesn’t feel like it’s a big deal to pay $25 minimum payments and $35 fee and also the interest
- But the truth is that they make 20% in interest from you and you can expect to make maybe 10% from the stock market
- It means that this is a game that when you play it this, theirs is no way you are going to win.
Avoid how:
- If you already got a late fee, you call in and ask for one-time forgiveness and they will forgive it
- And also you always pay your balance in full to avoid being charged interest
- But keep in mind that the average person is still overspending when using credit cards
Tip: also that late payment gets sent your credit score and your credit will get hurt because payments account for 35%. ( I guess that’s how they came up with the 35$ fee ( stays in for 7 years )
Tip 2: if you keep doing this, they will your interest in purchases even more, because you become a high-risk client.
2. Two or 3 More No payments
- They start to block your credit card from being used
- And they will still continue to report the late payments ofcorse
- And also charge you interest and raise it too obviously
Now by this point, you will start getting the Call:
- Hello Tommy you haven’t paid your credit cards in awhile is everything okay and can you make a payments
- Because if you don’t your account will be closed and your credit score will be messed up
- And most people by this point are in the hole.
But this is when you might want to negotiate with them:
- You explain to them that you can't make your payments ( and if they can lower it and make a payments plan without charge interest )
- And now if you are really good at negotiating you might get away owing less money, having a good amount of time to pay pay
- And they will negotiate because the alternatives is to send you to collections and sell your accounts for pennies on the dollar either way
3. 4 late payments or more ( charge off )
- This means you are bad clients and are very unlikely to pay ( back in the day they use to send you to jail)
- But these days you get sent to collections
- Or they might just sue you and try to get wage garnishment up to 25% and that’s not something you ever want on your credit score
And something worst is that:
- Once they charge your account you will receive a notice from the IRS
- Letting you know you will owe taxes on it 1099-c
- And then things start to get tricky
4. Overall by this point these are bad
- Your credit score is trashed, but you can file for bankruptcy if you want ( but that will stay with you forever )
- Or you can settle with collections and then wait for the charges to be removed in around 7 years
But this will make it really hard;
- To qualify for a loan on a house, car, and more.
My suggestions:
- Use a credit card just for automatic bills internet, apple music, and Netflix
- And set to auto-pay and you will build credit
- And just your debit card and cash ( if you need more money you need a better job or to lower expenses )
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