Debt Consolidation: Applying for Future Credit
Be Careful about Applying for Future Credit Once You’ve Gone through a Debt Consolidation
Once you’ve had to opt for debt consolidation in order to manage credit card debt, you will have to be careful about applying for future credit. Some current credit issuers are offering credit cards at exorbitant rates, which can force borrowers to consolidate their debts again if they are not careful. As a result, current credit card borrows can be especially hard hit with interest and fees.
Watch out for those Annual Fees
Even cardholders with decent credit can get socked with excessive rates. If the prime rate increases, you may possibly see some credit card APRs hovering around 30%, even if your credit score falls in a reasonable range. Although borrowers presently enjoy a lower prime rate, some credit card issuers are offering credit cards with interest rates as high as 12% (some higher). What’s more, credit card companies can charge annual fees that range from as much as $30 to a couple hundred dollars just for the privilege of using the approved credit card.
Also, Look at the Balance Transfer Fees if you are Applying for Credit
Fees and interest, indeed, can set the stage for a future debt consolidation as balance transfer fees can be assessed at rates as much as 5% of the amount being transferred. As a result, it’s important to scrupulously survey the fine print of credit card offers before making the decision to apply for credit.
Again, Care is Advised
Lenders notice that the current trend of cardholders is to pay off their monthly credit card balances. Therefore, cardholders are treating their cards more like debit cards instead of credit cards, which is helpful, given the current economic situation. Nevertheless, care is still advised when applying for credit as those excessive fees and rates of interest can make it difficult for the borrower to keep up with his payments, particularly if he uses more than a couple of the high-interest cards for making purchases.
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