A credit card is today in the wallet of many people. However, one should never use the financial play framework that results from it.
Credit cards are popular
Credit cards are a widespread means of payment in today’s society. The reasons for using credit card are numerous. In addition to uncomplicated transactions and the financial scope, many credit cards offer other advantages, such as insurance services and bonus programs that can vary depending on the card provider. But in addition to the advantages, there are numerous risks that credit card users should be aware of.
Beware of high interest rates
The billion -dollar entrepreneur Mark Cuban is extremely critical of credit cards. “If you use credit cards, you don’t want to get rich,” he says as part of an interview with the American radio presenter Dave Ramsey cited by CNBC Make. Cuban’s biggest problem with credit cards are the high interest rates. According to the latest data from the financial company Wallethub, the average interest rate for a credit card is around 15 percent. Some cards can even have interest rates of up to 36 percent. With an average credit card balance of $ 10,848 per budget, as Wallethub determined for the fourth quarter of 2023, correspondingly high interest. This is exactly where Cuban sees the danger: Not everyone manages to pay off the credit card balance completely every month, accordingly the interest payments are correspondingly high on the remaining amount. Sometimes the minimum payment is hardly sufficient to cover interest costs, he warns. He advises credit cards with an interest rate of 15 percent or more to be paid out completely and the amount that you save in interest to invest or to spend otherwise.
Private loan as an alternative
As an alternative to using a credit card, Cuban proposes the inclusion of a private loan that has to be repaid in regular steps over a certain period of time. According to the data of the Federal Reserve, the average interest rate here is 8.73 percent and is therefore much more lucrative – with high credit rating, the conditions can be even better, according to CNBC make it. At the same time, it is possible to even increase your credit rating from the perspective of the banks by adequately repaying the loan. Nevertheless, private loans should primarily be used for one -time necessary expenses, such as the exchange of one’s own roof or the consolidation of expensive credit card debt, Ted Rossman, Senior Industry Analyst at Bankrate.com to CNBC Make IT.
Editor finance.net