We’ve all heard the reason, ‘debt-traps,’ the phrase is often used as an excuse for someone being debt and a budget that’s out of control. These traps are frustrating, destructive, and are often harder than quicksand to escape. The most challenging task in trying to put an end to these problems, but the first step is admitting to being part of the problem. A debt-trap begins with the consumer who overuses or even abuses third party money. Companies make it easy with enticing offers, but we learn to say no. It takes a balanced budget, proper money management, and a bit of self-control to take full advantage of borrowing money.
Sign Up Point Bonuses Are Hard To Resist
One of the most natural traps for consumers to fall into is a rewards program debt trap. Credit card companies allow consumers to reap great rewards for using their cards. The idea is to entice a user to earn ‘points’ for dollars charged to the account. These ‘points’ or ‘reward dollars’ can then be used to purchase items from the rewards’ shopping list. The more points you earn, the better the reward. Some cards transfer points to miles for plane tickets. Other cards will earn hotel nights. The more points earned, the sweeter the hotel. Credit card companies will also offer merchandise, gift cards, or gas cards. Consumers can choose the card based on their favorite rewards. Many of these cards offer cash in advance bonuses for signing up.
Rewards Program Can Be A Debt Trap
Realistically, you should never use the card beyond reasonable charges. The fact is, there are so many people who charge extra to earn the points needed to get their rewards. Often money management is ignored when there is a prize dangling right in front of your nose. You earned your points, but now the debt sits with payments due. Increased charges raise minimum payments and increased interest charges. When charges occur over a short period, the new payment amount can often throw a budget off course. These special reward programs are a great marketing technique to gain new customers. Just because you receive an offer in the mail, read an advertisement online, or get the sales pitch at the checkout counter, you have a choice to accept it or not.
Only Spend What You Can Pay Back At The End Of The Month
Do you consider your current credit debt before applying for a new card? Are you aware of what the hard inquiry will ding your credit? There are many factors you should consider first and then focus on the rewards program. If you don’t pay your credit card off every month, the program is far from free. Interest charges make your rewards go to the credit card companies. The more you smother your budget with new debt, the tougher it will be to meet the following months’ budget expectations. Debt traps lead to credit challenges. Was the reward worth it? As you work to payoff off your debt, tuck that credit card away and ignore further reward offers. Work on a better management system to help you stick to your budget.