Credit Management by Knowing How Credit Card Interest Is Calculated

1. Make sure you pay off every single cent by the payment due date stated in your statement every month, which means $0.00 in your outstanding payment. Why? Because if you have balance amount that is brought over, the interest that you are paying does not only includes the interest of the remaining amount, it also include the new purchases you made during the month. It simply means that if you have outstanding balance, you will not enjoy the “Buy First Pay Later without interest” benefit.

2. Credit card interest is not only based on 24% per annum or 2% per month, it is being calculated on a daily basis which is 24% divided by 365 (days in a year) that equate to 0.0658% interest per day.

For example, If you have accumulated a total of $3,000 and have only managed to pay off $500, the remaining $2,500 will have interest charged on it. If you have noticed from the picture, the interest per day can come out to a sum of $1.65, which you might not see it as make a purchase during this period (the period which you have not cleared the payment), the amount will be added and interest will be incurred on the new total amount.

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Credit Management Should Be Taught in the Schools

It is a shame that good credit management is not taught to many children in our schools. A number of college students nowadays already have a credit card with credit card debt incurred by the time they show up for their first day of college classes. The credit card companies want to hook them on easy credit as early as possible. Credit card companies make money on the unsuspecting consumer in a number of ways.

Credit card users who carry a balance will incur a monthly finance charge that gets added to the outstanding balance on the card. By simply paying off the balance on the card each month, a lot of money can be saved. Some credit card companies actually consider cardholders who do not carry a balance to be deadbeats, because the card company does not make any money off of them.

Even one late payment can result in a huge increase in a cardholder’s interest rate. Being late on one card can even increase the interest rate that other creditors will charge the consumer, even though the consumer is not late on those other cards. Late payments can get reported to the credit bureaus and negatively impact a consumer’s entire credit rating.

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Credit Management – The Key to a Better Credit Score

We all want the best possible credit score we can get because so much depends on it in the twenty first century. Where as in the past your credit rating determined whether or not you got an auto loan or a mortgage and that was pretty much it, things have now changed.

Potential employers have begun to ask for a copy of your credit report and even current employers considering you for promotion want to see it too. Now of course some industries have been doing that for years, but they were usually only in highly sensitive fields such as financial services, defense and the chemical or biological industries. Nowadays, it seems that even the most mundane occupations require you to provide proof of your good credit management skills arguing it shows your financial integrity.

That of course is true, if you have integrity and commitment to your financial responsibilities it is reflected in a much better credit score. And of course since the advent of Vantage-Score from the big 3 credit bureau it is even easier to see just how you rank financially.

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