Borrowing money is a modern day phenomenon that we cannot escape. Hence the reason why we feel the need that we can escape to financial freedom via the route of a credit by condition; Here, borrow some more money…
No wonder the UK has an endemic debt problem when the banks and credit card companies literally throw money at us. Almost every month we receive some nice blank cheques from the Credit Card company MBNA almost pleading with us to spend them on a ‘new car, holiday of a lifetime, flat screen TV etc’. But these credit card cheques come at a hefty price so beware.
Simply because they’re very expensive to use and there are far cheaper options out there if you want to borrow money. In a recent report it was revealed that 1 in 3 people who use Credit Card cheques are unaware that there is a charge levied and 2 out of 3 have no clue what the actual interest rate charged will be To add to the mix it was also revealed that 98% of Credit Card cheques are sent out unsolicited Typical charges on using the cheques are 2% plus of course the relevant interest rate that the credit card charges
Firstly, why use the cheques at all - why not just use your card instead? This way there’s no ludicrous 2% charge. Secondly, think very hard about what you’re actually borrowing the money for and perhaps more importantly how long. Credit card interest rates are typically very high (average 15%-20%) so borrowing money at these levels for anything longer than a few months is clearly bad financial planning. Better to try and take out a loan which you can get for around 5%-8% as long as you have a good credit rating - if you have any Defaults on your credit rating then see this article on how to get them removed.
When consumers don’t know what they’re doing or how things work then this is really nirvana for anyone selling them the products especially in the financial world. The Credit Card companies are rumoured to be making over £500 million a year just from the charges levied on these blank cheques. So be financially smart, rip these cheques up as soon as they come though the letterbox and if you must borrow money then at least try and do so at the cheapest costs.
Jamie is an author of several articles pertaining to Credit Cards. He is known for his expertise on the subject and on other Business and Finance related articles.
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