Understanding Credit Cards Ins And Outs

These are tough times. Whether you are out of work or simply have lost some hours, money is tight for many people across the world. When you have a change in circumstance, you also need a change of attitude when it comes to money.

The most important thing to do when you are faced with financial straits is communicate with your credit card company (or companies). You need to remember that they want to work with you to make sure your payments come in. The longer you are a happy customer, the more money they make, so you are actually at an advantage even when a loss of income or a financial emergency might put you in survival mode.

Prioritize Your Payments

One of the first things that people will do when the credit card bill comes and money is tight is start to panic and then try to justify not paying another bill just to avoid fees or other consequences. While this is something that you might be able to do, there are several bills you will get that are far more important than your credit card:

• Home loan
• Car loan
• Auto insurance
• Student loans

Obviously, your home and auto loans are important, but missing one payment could be more than enough to have your ownership taken away. It all depends on your lender. Your bank might work with but you never can tell. While credit card companies will start to charge you fees as you miss payments, the penalty is still much less severe than your loans that are much more substantial.

Use Grace Periods

You should always remember that your credit card has a grace period. Actually, there are often two grace periods. There is an interest free grace period that allows you to avoid interest when you pay off new charges in full within a set number of days and there is also a payment grace period that lets you make your payment within a set number of days after the statement due date. Some credit cards give you a few extra days to make your payment before a fee is assessed.

Ask About Your Options

As with most contracts and agreements not everything is set in stone; and even if you agree to something a good credit card company who wants to keep your business will have some options for you. In many cases you can get your minimum payments reduced or even avoid fees if you can't make a payment this month. If you are suddenly injured or unemployed, for example, credit card companies have special plans they can suggest that are catered to these kinds of situations.

Understand The Ramifications

If you do not prioritize your payments, effectively utilize grace periods, and ask about your options you better be prepared to deal with the consequences. Missing a payment on your home loan could find you on the street, even after just one month. Similarly, missing a car payment could find your vehicle repossessed. When you miss a credit card payment, though, you still have time to make it right.

This is because missed payments are not usually reported to the credit bureaus for at least 30 days. In addition to this it usually takes 180 consecutive days without a payment before your account is actually sent to a collection agency. It is completely possible to avoid any issues if you simply just make an effort within this time frame.

If you do not make an effort, however, and you are consistently more than 29 days late on your account - even if you consistently make payments - your credit score could be in trouble.

Setting Up A Plan

There are several things you can do to avoid and of these problems should you have an issue now and then with making payments.

• Establish a budget - yes, it is obvious, but most people overlook it
• Start an Emergency Fund - even $20 a month comes in handy when times are tough
• Use Technology - setup text alerts or Google calendar reminders for bills, etc.
• Track Your Credit Card Activity - there are many ways to do this. Just keep an eye on how you spend and how often

Conclusion

The right credit card strategy includes a contingency for what you should do if your income decreases. Many companies will work with you so you can continue being a loyal and happy customer which, in turn, ensures that they retain your business.