At some point in our lives we all have some sort of debt; student loans, mortgages and car financing are the most common types of debt we carry. Everyone seems to have his or her own opinions about debt and debt management; however there are a few myths about debt that most would agree on. Here are six most common debt myths, feel free to add your debt myth at the end.
1. Debt Is A Necessary Evil
This is often used to justify over spending and continuous borrowing, however it is a myth. Although debt may sometimes be needed to reach a certain goal it is not a way of life and not always necessary. Using the excuse that everyone is in debt only enables people to dig themselves deeper into debt.
2. Paying the Minimum Payment is Fine
If you are carrying a debt and only make the minimum payments it will take you years and thousands of dollars to pay it off. Although making just minimum payments are ok it is not fine, you should always try to make a larger payment than just the minimum in order to get out of debt. Having the mentality that minimum payments are fine can be an expensive one over the long term. Read More…
New regulatory rules in Ontario prevent companies from doing what you describe.
Some banks actually don’t use your minimum payments to pay down the highest interest parts of your credit card. Credit cards are broken down into separate sub-sections: Purchases, Cash, and Transfers. The highest interest rates are usually reserved for cash. So when a customer makes a payment that has previously done cash advances their payment would go towards purchases or existing balance transfers which normally have lower interest rates, thus making the banks more money because the higher interest cash is still pending. The only way around it is to pay down your entire balance in full!
Borrowing moneyu from one credit card to pay down another is known as “kiting” in the industry and is something credit card companies hate immensely. If they discover you are doing this they will flie a complaint on your credit history which could linger for up to 5 years.
omg everyone just pays their minimum monthly credit card bill and not realize that they re being hit with heavy interest.
For some reason people think when you just pay the minimum the bank will not charge them interest at all. Or if they pay the entire balance after not doing so for several months they are perplexed as to why they are still seeing interest in the following month (its because of residual interest from prior months).
A lot of people think bankruptcy and debt consolidation loans are the easy way out of credit card debt which is pure bologna because even though those solutions may seem like a good option they aren’t easy and they arent painless. They should only be considered as a last ditch approach to saving youself.