Top 3 Pitfalls of Refinancing Your House To Pay Off Your Credit Cards


Some people believe that when you have huge amounts of credit card debt, refinancing their home is a perfect solution it all off. Why not? That would relieve some of your interest rates and a whole lot of your stress, and you are already paying on your mortgage anyway, so what could it hurt? But think about it. Is it really a good idea to put more debt into your home? In the long run, it’s really not too great of a deal. The top three pitfalls of refinancing your house to pay off your credit cards may shed a little light no the subject, and it just might change your mind.

1. More interest

No, not necessarily higher interest rates, but more interest. You already have to pay enough interest on your house as it is. In fact, the first several thousand dollars you spend when you begin to pay for your home is wholly dedicated to paying off the interest. It is not until later that you even begin to pay on the principle. Having this much interest to pay over such a long period of time, may actually extend the time it takes you to pay for your home.

2. Longer payment period

If you refinance your home so that you can pay off your credit cards, it takes a lot longer to pay off your home. Having a home loan is a long and drawn out process as it is. If you add your credit card debt to the debt that you owe on your home, this will increase the amount, and the time it takes to pay that amount off. Sometimes, depending on how much credit card and/or mortgage debt you have, you could end up paying off your loan for the rest of your life… or perhaps your debt could even spill over to a burden your children or successors will have to carry.

3. Putting your home in jeopardy

Transferring your credit card debt over to your home loan can be high risk of greater loss. For example, if you fail to pay off your credit card debt, the worst thing that can happen to you is you lose your good name in credit, you file for bankruptcy, your credit score goes down, and you basically have an extremely low chance of ever getting anything on credit for a really long time. Sure, that’s pretty harsh, but think about your mortgage. If you fail to pay your home loan, you are not only putting your credit at risk, but you also run the possibility of losing your home.

Whether or not it’s best for you to refinance your home to pay off your credit cards is completely up to you. The best thing you can do to help you decide is to know the factors that come along with it. If you know you can successfully pay for your refinanced home, and that you can save money doing it, go for it.

Signature Loans Vs. Credit Cards


Signature loans are generally pretty easy to get. It is easiest when you have a good credit history, but not impossible to get when you have bad credit. These type of loans are founded upon a single signature. You do not have to put up any collateral up to get a signature loan. This is one way in which it differs from most loans, including the usage of credit cards.

Which is better?

There are pros and cons to both signature loans and credit cards. Which one is right for you is dependent upon your financial situation and the kind of spending you want to do on credit.

Credit cards

The good thing about credit cards is that you almost ultimately control how much you get to spend on credit. If you have a good credit history, you can qualify for a very large amount of credit. You can choose, within that amount, what your credit limit will be. With signature loans, often times the maximum amount you can borrow is ten thousand dollars. Of course, in some cases, having a smaller limit on how much you can borrow might not be such a bad idea. It all depends on your spending habits and your ability to pay the money back.

The payments you make on your credit card depend on how much you spend. The larger the balance on your credit card, the more you pay monthly. With signature loans, you pay a set amount every month, or even every two weeks. This depends on how much money you took out on loan, but it does not vary depending on how much of that money you spend or what you use it for.

Signature loans

When you apply for a signature loan, there is no requirement of collateral. The thing that they lenders look for is a good credit rating. This assessment alone will determine whether or not you qualify for a signature loan. Once you qualify, all they need is your signature, and you have the loan. Sometimes it’s easy to forget that it is STILL borrowed money, that you must pay back.

Interest rates on signature loans are based also upon the applicants credit rating. It is not impossible to get a signature loan if you have bad credit, but you will better chances and lower interest rates on your loan if you have good credit. With credit cards, a larger variety of people can qualify for credit cards with low interest rates, even if they don’t have great credit ratings. The problem with credit cards is that, usually, if the person has a bad credit rating, they probably will not be able to pay back the money they would owe on a new credit card. Still, credit cards are offered to many people regardless of their financial abilities.
Whether a signature loan or a credit card is best for you depends on how much you want to spend, how well you can control your spending habits, and how well you can make your set payments.

Rewards Cards Are My Best Friends


There are many types of credit cards out there. So when you are searching for a good one, you should take into consideration what you can get back by using that credit card. Sure, you can get the lowest interest rates ever, make your payments on time, and end up saving money, but is there such a thing as making money with a credit card? Many people associate the word “credit” with the word “debt”, but when you use rewards credit cards, you can actually get money back from the things you bought on a credit card. Think of it as buying something on credit and getting a free gift to go with it. How much you spend depends on what the free gift is. Here are a few examples of the kinds of rewards you get by using these certain credit cards.


Rewards cards will often give you however many points for a certain amount of money that you spend using your card. After a period of time, you can cash in your points to get discounts on certain items, such as gasoline, food, clothing, travel, and sometimes you can even trade them in to get cold hard cash. The longer you let your points rack up, the more rewards you get at one time. In a way, it’s like getting back some of the amount you spent on your card.

Travel Rewards

If you use your credit card to travel by air a lot, you can build up your air miles. Buying an airline ticket with your credit card earns you a lot of points, allowing you to get huge discounts on airline tickets. With some cards with specific rewards, you could get points added on if you buy a new car with your credit card. In any case, if you travel a lot, a travel rewards credit card will allow you to get discounts on your traveling expenses.

Zero Balance Credit Transfer

Some credit cards offer you the opportunity to transfer your balance from another card to theirs, giving you the benefit of having interest free payments if you pay them within a certain period of time. This is beneficial if you have high interest rates on one of your existing cards and wish to get them down at least to a low number. This allows you a certain period of time to pay off your debt with absolutely no interest to worry about.

If you are shopping around for a good credit card, why not get one that will give you a little back? Saving money in any case is a huge opportunity, and rewards programs allow you to get back some of what you spent. Depending on the type of person you are and your spending habits, it is up to you to decide what type of rewards credit card will be most beneficial to you. The biggest thing is to pay your credit card bills on time. If you make a lot of late payments, these rewards are not applicable to you because you don’t pay back what you spent.

Will Canceling Old Credit Cards Hurt My Credit Score?


So you have had a couple of credit cards for several years, and you have finally paid them all back down to a reasonable amount. You are thinking maybe you should close them out so that you never have the chance to spend on them again. But what are the consequences? Will it really help or will it hurt your credit score? One of the biggest misconceptions about closing out credit card accounts is that you should close your oldest ones first. Not true! Closing the accounts that you have had for the longest amount of time will not improve your credit score. In fact, it will most likely make your credit score go down.

Why will my credit score suffer just because I close my old accounts?

Having credit cards for a long time, whether or not they are active, actually help your credit score because it shows that you have long and healthy credit history. If you close those credit card accounts, it will lower your debt-to-available-credit ratio, making it appear that you have a shorter credit history than you actually do. So shortening your credit history makes it look like you have less experience buying things on credit cards, which puts you at a higher risk of being undependable with your payments. If it appears that you may not make your payments in full or on time, your credit score will not be as high as it should be.

Won’t closing my old credit card accounts erase all the late payments I made?

Maybe you had late payments on a few of those old credit cards, and you think that if you close them out they will be forgotten. This is false. Negative records, such as late payments, can remain on your credit report for up to ten years, whether or not you have paid off and/or closed out those accounts. So whether you have had negative reports on those credit card accounts or not, it is best to keep those accounts open, and allow time to erase any mistakes you made on those credit card payments.

Should I keep my accounts open even if I’ve paid them off?

Yes! Even if you do not plan to use those accounts anymore, it is best to keep them open to prove that you have a long credit history. The longer you have your credit cards and the older the accounts get, the more benefit they are to you. If you feel that there is too much of a temptation to spend the credit that is on those accounts after they are paid off, perhaps you should consider closing out the newer and more recently opened accounts. If all you have are new credit cards, even if they do have low interest rates, your credit score will not be as high because it will look like you have not used credit cards for very long, and have less experience using them and paying the bills on them.

Top 3 Pitfalls Of Misunderstanding Promotional Interest Rates


Interest rates are commonly misunderstood. It is difficult sometimes to take in all the detail that comes with them, and the many different kinds of interest rates. Still, understanding how interest rates work is an essential part of having credit cards. The penalties for misunderstanding interest rates, especially introductory or promotional rates, can be a mistake that ends up costing you way more than you thought it would. It is important to know everything about the interest rate on a credit card before you even get it. That way, there are no surprises.

Top 3 Pitfalls of Misunderstanding Promotional Interest Rates

1. Buying on credit cards and paying later… in more ways than one

This seems to happen a lot when you buy things on credit from specific stores. They promise you a tempting 0% interest rate for a certain period of time, during which you do not even have to make any payments if don’t want to. But the thing about interest rates is that whether you are paying interest or not, it still builds up, slowly increasing during that time and adding up to be more than you bargained for. For instance, you could buy a couch from a furniture store because it promised a low interest rate for the first six months, in which you don’t pay a dime, and then find out six months later that the interest rate has been climbing and is suddenly ten times more than you started out paying.

2. Balance transfer offers

Along with low interest offers that you often find in stores, balance-transfer offers present great promotional interest rates. But if you find out more about it, you may come to see that these rates may only be in effect when transferring a balance or when a new purchase is made with your card. Sometimes it only applies to one of those cases, leaving you stranded with a high rate when you use one or the other. For example, if you were to transfer your balance to one credit card that seemed to have a low interest rate, but proved only to apply that low rate to new purchases, you come out paying way more than you thought you would starting out.

3. Having low promotional rates sky rocketed into high regular interest rates

Find out exactly when your seemingly perfect interest rate expires. You could get a great interest rate on a credit card at first, but because you did not read the fine print, you come to find out that great rates only last for so long. Many credit card companies will start out with low interest rates, but can increase them after a certain period of time, making you pay ten times more than you started out paying.

Understanding how interest works and knowing just exactly what you’re getting into when you apply for a credit card that has low rates is very important. Paying on credit cards is much easier when you know how much you will be paying now and what you will pay once the promotional rates expire.

Top 3 Myths About Paying Off Your Credit Cards


So you have finally paid off all your credit cards. It took you a long time, and for a while it didn’t look like you were going to get it done, but you are finally at the point where you are debt free. It’s a great feeling, isn’t it? So you sit back in your easy chair, patting yourself on the back…but what happens now? Will this add or take away any points from your credit score?

Would it be better to just close your account so that you won’t be tempted to get into debt again? Since you paid off your debt, will your late payments and other negative records be forgotten on your credit report? Maybe you should know a little bit more about what is fact when it comes to paying off your credit cards, and what is fiction.

Myth: Your Credit Score Will Improve by At Least 50 Points Because You’re out of Debt

Fact: Some would like you to believe that just because you paid off your debt, your credit score is going to improve enormously… fifty points is the most popular belief. But because of the complex formula that is used to calculate your credit score, it is difficult to say just how many points exactly will be added to your score. Even if it isn’t fifty points, your credit score will, in actuality, improve.

Myth: Negative Records Will Be Taken from Your Credit Report Once You Pay Them Off

Fact: Whether or not you pay your credit accounts off on time or even early, your late payments and other negative records could stay on your credit report for up to ten years. Paying off your accounts early will improve your credit score, but it will not take away the mistakes you’ve made that hurt it. Eventually those mistakes will be erased from your credit report. It is just better to not make a late payment in the first place, keeping your credit report clean.

Myth: Your Credit Score Will Get Better If You Close Your Old Credit Card Accounts

Fact: The longer you have an account, the better. Having an old account, whether it is active or not, is good for your credit score because it shows that you have a long credit history. This is beneficial especially if you’ve paid all your bills for that account on time. Closing an old account can lower your score because it can make your credit history look shorter. If any accounts should be closed, it is best if you pay off and close the newer accounts rather than the old ones.
Getting out of debt is a big relief, but knowing how to pay off your credit cards can be beneficial when it comes to keeping a high credit score. The key things to remember are that it’s best to pay them off, but keep the old ones open, and pay the requirements on time so you can avoid negative records on your report.

Top 3 Myths Surrounding Your Credit Limits


Credit card limits allow us to set a range of the amount of money we can spend on credit. When used appropriately, this limit will help keep us from spending beyond our means to pay back the amount owed plus interest. So why have so many people gotten into credit card debt by spending on a high credit limit when they knew that they would not be able to pay it back?

Sure, a high credit card limit can be alluring because it makes it look like you can spend all you want and have whatever you want. But a smart credit card holder would know the difference between what looks good, and what will save them money in the long run.

Top 3 Myths Surrounding Your Credit Card Limits

There are a few misconceptions that people often experience when they set their credit limit. Credit card companies can lead them into believing myths that will eventually get them into financial trouble. Here are a few of those myths:

• The Higher Your Credit Limit Is, The Better

Credit Card companies would like you to believe that it is good to have a high credit card limit, and that is true… it’s good for them. High credit limits increase the possibility of excess spending, or spending beyond your means. That leads to larger amounts of money to be paid on your bills, which may cause you to make late payments. Of course late payments result in higher interest rates, making it even harder to pay your dues. Eventually it will take you longer to pay off your credit card debt because you spent more than you can pay back.

• Going Over Your Limit Is Okay If Your Credit Card Company Approves It

Whether or not you pre-approve a purchase that will go over your limit with the credit card company, it will still hurt your credit score dramatically. Your credit score doesn’t depend on whether or not you have authorization to go outside your credit card boundaries, it depends on whether or not you can stay within your limit, no matter what it is, and efficiently pay back what you owe. So even if the credit card company says it’s okay, you still appear unreliable because you went over your set limit, therefore significantly lowering your credit score.

• A High Credit Limit Will Not Threaten Your Ability To Pay Off Your Credit Cards

The best way to stay out of debt is to not allow your spending opportunities to go beyond your reimbursement abilities. If you can easily see that you could not pay back the money you would owe if you spent up to the amount on your credit limit, you simply should not set your limit that high. Keeping your debt as minimal as possible is everyone’s goal, and the debt you incur is more likely to increase if your credit limits are high enough to tempt you to spend beyond your means.

What Are The Pros And Cons Of High Credit Limits?

Pros and Cons of High Credit Limits

When using a credit card, a limit is set upon how much you can spend before you max it out. This limit varies for each person and each credit card. So how high can your limits be? Or, more appropriately, how high should they be? Many would agree that a high credit limit would allow you freedom to buy as much as you want of whatever you want. Oh sure, you can pay for it later, it’s no big deal. Others would say that in reality, high credit limits bind you with debt that you cannot pay back. So who’s right? Is it really that bad to have high credit card limits?

Advantages of High Credit Card Limits

• Using your credit card more, as long as you pay the bills on time, adds points to your credit score.
• Purchasing expensive items is less of a hassle.
• You have money on hand for emergencies should the need arise.
• You do not have to worry about maxing out your credit cards.

Disadvantages of High Credit Card Limits

• If you cannot pay your monthly bills, the interest rates increase more quickly with a high credit card limit than if you were to have a low limit.
• Someone may steal your credit card, and with so much space within your limit will allow them to spend more money that you would have to pay back.
• With a higher limit, it would be more tempting to buy things with money you don’t have, even if you know that you could not pay it back.
• There may be less of a risk using some other form of credit, like taking out a loan.

Do It the Smart Way, Or Don’t Do It At All

When you put a limit on your credit card, be sure that even if you got to the limit that you could pay the money back without strain. Anything that you want that is more expensive than the amount you have within your limit is probably more safely purchased with a loan. It may even be worth it to save up money to buy it. Otherwise, if you cannot afford to increase your credit limit, you probably cannot afford to buy something that expensive.

Make It Easy To Give Back What You Borrow

It is good to keep in mind that no matter what you buy on credit, whether it is expensive or not, it is not yours until you have paid back the money that you borrowed to get it. The pros and cons of high credit limits do not change the fact that credit is money that you do not have, and so the best type of credit is affordable credit. Keeping your limits low will allow you to more easily pay your monthly bills and pay off your credit cards more often, and overall, you will be less likely to get trapped in debt that you cannot get rid of.

How Much of My Credit Limits Can I Use Without Damaging My Credit Score?


You know that your credit score is based on how well you can pay back your credit card bills. So how do we know when we’ve spent too much to pay back? Thank heaven for credit limits. We set these limits so that we do not exceed the amount that we know we can easily afford to pay back. So how close can you get to your limit before it starts to damage your credit score? Here are a few tips to help you understand how much you really should spend within your limit in order to maintain a good reputation in the credit world.

DO NOT go over your credit card limit

No matter how much you want to pay for that riding lawn mower with your credit card, even if it costs more money than you have within your limit, don’t do it! Going over your limit can cause your credit score to go plunge dramatically. Even calling in to the credit card company and prearranging an expense that will exceed your limit will not excuse you from the penalties. If the credit card companies authorize you to go beyond your limit it may exempt you from getting your interest rates heightened, but you will still be subject to the consequences on your credit rating.

Spend only up to about 50% of your credit limit, then pay it off

Sometimes the best way to ensure that you do not go over your credit limit is to set a goal that you will pay off your credit card bills once you have spent half of your limit. That way you will not even get close to maxing out. This also helps you to keep your monthly dues at a reasonable amount, allowing you to pay them easily and on time. Being smart and conservative with your money will show that you are responsible enough to pay your debts, allowing for your credit score to steadily improve over time.

Don’t set your credit card limits too high

You should set your credit limits to an amount that you know you will be able to pay back. Having a limit that is too high puts you at risk of spending more than you can afford to make a monthly payment on. It may be somewhat beneficial to set your limit a little bit above your afford ability in order to keep from getting too close to exceeding it. But having a credit limit that is too high for you to ever be able to pay back lulls many into believing that just because they don’t go over the limit means that it’s okay to go up to that amount.
The main thing to remember when you set your credit limits is that your credit score can benefit only if you do not exceed your limit, and if you pay off your debt before you get too close to that limit. Credit cards can either help or hurt you, depending on how you manage them.