No more increase please

I was doing my weekly banking online when I noticed that the credit limit on my credit card has increased. I always thought that they increase it for you if you make a request to increase the limit but apparently it’s done automatically. I don’t know why they are increasing it without me asking but I think they should stop.

It’s hard enough to try and not spend money on things but with a credit limit of $5000, it’s very tempting. I don’t charge a lot of my purchases to my credit card often because I want to keep the interest low. I think this month alone, I must have paid $100 in interest along with a fee that Visa charges every year. With the interest and the fees, it’s as if I’m not making any payments towards my monthly invoice.

Credit card companies are tricky that way. They tell you that you can pay a minimum and you’re good until next month. But what more people don’t realize is that the minimum monthly payment is just the interest fee. It doesn’t go towards your actually invoice. For example, if your balance was $300 and the monthly minimum payment is $20, your total balance is $320. If you pay the $20, that will bring down your balance to $300. But next month, the interest fee gets calculate and now your balance is back to $320. That $20 payment was just the credit card company’s way of saying, “If you’re not going to pay the full balance, I’ll give you time but it’s going to cost you $20.”

If I max out my credit card, the interest alone will kill me. Five thousand dollars at 19.9% interest compounded monthly would mean an interest of approximately $80 per month. That adds up to just under $1000 per year. If I make a minimum balance of $80 per month, by the end of the year, my balance will still be $5000 even though I paid close to $1000 throughout the year. You see, it’s the little things that adds up.

There are a lot of people who are having some sort of financial problems due to credit cards. The credit card companies don’t care about their problems. All they care about is getting their money back plus more. A friend of mine plans on declaring bankruptcy in order to get his life back on track. He has a family to worry about and I can see him struggling a little. I tried to help out in the past but their bills were just too high. They applied for a line of credit a few years ago to help out with the bills but I think that line of credit was a mistake.

Line of credit and credit seem like they’re the same thing. But the differences between the two are the interest rates and limits. A line of credit usually has a lower interest rate but a higher limit. The money that you borrow from a credit line is what your pay interest on. For a credit card, you’re paying interest on the amount that is outstanding. That’s not to say that a line of credit is better than a credit card. I think the credit card is more convenient than a line of credit. But in the end, they’re both the same thing.

Time after time, I advise my friends to watching their speding habits but no one seems to listen. They continue to buy things that they can’t afford and in the end, they’re in a heap of trouble.