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How to use your credit cards effectively: 6 tips

It goes without saying that credit cards are useful for monetary transactions in this cashless society. Credit cards meet the needs of different people in different ways. It is thus important to choose the right card and use it effectively so as not to fall into a debt trap.

Below are some tips to help you use your card to your maximum advantage.

1. Interest free period

A card that offers interest free charges for longer, or one that has lower interest on purchases will suit a consumer who needs extra time in paying for his or her purchases every month. If you know that you can’t pay your balance on time, look for a card that offers a longer interest free duration.  Some banks offer no interest for up to 6 months or more, so this may be a good offer to take advantage of as long as you don’t overlook the date the interest rate charges commence.

2. Be aware of annual fees

If you are planning to use your credit card for basic needs such as making rare online transactions and as an emergency backup paying for an annual fee will not be worthwhile. However, if you are a frequent user of the credit card and are after the rewards programs or redeeming your points for purchases, then the annual fee may be worth paying for.

3. Stick to the minimum credit limit

It won’t always be a good idea to increase the credit limit of your card if this is offered by your bank.  By sticking to the minimum credit limit, you can be assured of not being lured by the temptation to overspend. Also, trying not to get too close to your credit limit is a good way of restraining yourself from unnecessary spending. Spend within your budget and only spend on what is necessary.

4. Avoid frequent card switching

Some people tend to switch from card to card with the aim of saving money with balance transfer rates. Though this may sound practical, if you fail to pay the required amount on time, or to switch card again before the interest rate goes up, it may end up damaging your credit.

Some banks offer a grace period of 6 months before a balance fee applies. Failing to pay up by the stipulated time will result in having to fork out unnecessary expenses. In addition, credit card companies charge a balance transfer fee so that they make some money from credit card switchers. Alternatively, you can call your bank to ask them to match the offer before switching to another bank that offers credit cards with a lower interest rate.

5. Track your credit card expenses

Keep your receipts in a safe place so you can keep track of your monthly expenses. By doing this, you can check yourself from making an impulsive purchase knowing how much you have already spent in a particular month. A debtor’s worse nightmare is spending beyond his or her budget or maxing out on the credit card, hence escalating his or her debt.

6. Pay in full

Banks require their credit card customers to pay at least the minimum charge each month.  Making only the bare minimum payments may cost you more money due to the interest mounting up. It is advisable to use your credit card to pay for items you can afford to pay in full in each to avoid the debt trap.

Credit cards can be an advantage if you can use them effectively. Look at the above tips to ensure that you are getting the most out of your credit card.

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Home Equity Loan Tips!

Home equity loans allow a homeowner to borrow  money by pledging the house as collateral. Borrowers  who want to borrow a relatively large amount of money  or who don’t have good credit often find the home  equity loan to be attractive.

                     

How Collateral Works

A home equity loan is a type of second mortgage,  not to be confused with a home equity line of credit.

Lenders may be more liberal because they view home equity loans as relatively safe. You can’t disappear with your house or hide it if you default on your loan, so the lender has a good chance of collecting the collateral. Also, you are likely to make your payments a priority if your home is on the line.

Advantages of Home Equity Loans

Home equity loans are attractive to borrowers for a few main reasons:

• They typically have a lower interest rate (or APR)
• They are easier to qualify for if you have bad credit
• Payments on a home equity loan may be tax deductible
• Borrowers can get relatively large loans with this type of loan 

Common Home Equity Loan Uses

Borrowers use home equity loans for some of life’s larger expenses, because homes tend to have a lot of value to borrow against. For example, you find that a lot of borrowers want to

• Remodel or renovate the house
• Pay for a family member’s college education 
• Finance the purchase of a second home
• Consolidate high-interest debts

Pitfalls of Home Equity Loans

Before using a home equity loan for any purpose, you should be aware of the pitfalls of these loans. The main thing is that you can lose your home if you fail to meet the payment schedule required by the loan.

Another common pitfall of home equity loans is that scammers have found plenty of ways to cheat homeowners out of their most valuable asset. Be sure that you know who you’re doing business with. If something smells fishy (like a high-pressure sales pitch or an inability to put things in writing), then take a step back and make sure the deal is legitimate.

How to Find the Best Home Equity Loans

Finding the best home equity loan can save you thousands of dollars – at least. In order to get the best loan, I recommend that you:

• Shop around. Try a variety of sources (banks, brokers, and credit unions)
• Manage your credit score and make sure your credit reports are accurate
• Ask your network of friends and family who they recommend
• Compare your offers to those found on websites and advertisements

Additional Home Equity Loan Tips

To make the deal work out in your best interest, make sure that it is the right deal in the first place. Is a home equity loan a better fit for your needs than a simple credit card account? If you’re not sure, figure it out before you put your home at risk.

Plan out your budget ahead of time. Make sure that taking the loan will not overburden you.

Review and consider insurance to cover the payments if something happens. You may or may not need insurance. If you’re going to include it in your program, try to pay the premiums monthly – not up front.