5 Common Debt Traps That You Need To Avoid

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Ever since the current financial crisis arose more and more people every day find themselves receiving messages from private businesses, banks and consultants offering to help them reduce their debt. These programs may sound useful but could actually result in these people find themselves further in debt later on. Below we offer some tips on what to look for in order to avoid 5 common debt traps that others have been faced with before.

Trap 1 – Credit Cards That Are No Or Low Interest Rate Ones

A great many banks today are actively sending out messages every day in an attempt to get us to take out a new credit card. The problem with these types of cards is that should you miss a payment or pay money late then the offer you were given initially will not be valid any longer and you will then find yourself having to pay higher rates of interest on what is owed.

Trap 2 – The Balance Transfer Game

A large number of credit card companies are trying to entice customers to transfer the balance of their present credit card to theirs by giving them a much lower rate of interest on the new one. However if you do take out such a card and then find you cannot stick to their restrictions then you will once again find yourself in more debt than you were before.

Trap 3 – Using A Debt Consolidation Service

Many of these services will promise to work with your creditors in order to help you get your finances in order. But you need to be careful as just as many will change the terms of their plan without any prior notice to you when the creditor decides to change the terms of theirs. Also you need to be wary as some require you to pay quite hefty fees to them in order to be able to enter their program. So be wary as you could find yourself further in debt before they have even begun to help you.

Trap 4 – Payday Loan

Today there are plenty of companies who provide such loans and who will deliberately target those who need money without too many questions being asked. But the biggest problem with using these kinds of loans is how much interest you will be charged when you repay the loan. Today the average rate of interest being charged by these companies is between 200 and 400%. So the biggest problem with this one of our 5 common debt traps is that although money is available easily when the time comes to repay it you may find it hard to do so.

Trap 5 – Buying At The Sales On Credit

Okay buying when the sales are on is very cost effective, but if you use a credit card and you aren’t actually able to pay back everything you owe the following month it can prove very expensive indeed. Remember you will then be charged interest over the coming months on the money that you owe. So turning what you thought was a bargain into yet another of the 5 common debt traps people are faced with.

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Topics: Bankruptcy | Comments Off

Tags: Bankruptcy, Business, consolidation, Credit, debt, debt management, Finance, financial, home, iva, ivas, Management

Article Citation
MLA Style Citation:
Banks, Cheryl "5 Common Debt Traps That You Need To Avoid." 5 Common Debt Traps That You Need To Avoid. 1 Apr. 2011. uberarticles.com. 8 Apr 2012 <http://uberarticles.com/finance/bankruptcy/5-common-debt-traps-that-you-need-to-avoid/>.

APA Style Citation:
Banks, C (2011, April 1). 5 Common Debt Traps That You Need To Avoid. Retrieved April 8, 2012, from http://uberarticles.com/finance/bankruptcy/5-common-debt-traps-that-you-need-to-avoid/

Chicago Style Citation:
Banks, Cheryl "5 Common Debt Traps That You Need To Avoid" uberarticles.com. http://uberarticles.com/finance/bankruptcy/5-common-debt-traps-that-you-need-to-avoid/

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