Knowing Credit Card Interest to Avoid Credit Debt Counseling

No matter where you stand in terms of credit card use there is one thing you must know and perceive well - credit card interest. Even if it's just a general run through of the basics involved, knowing how credit card interest works could very well be the difference between getting yourself deep in debt or maintaining your financial stability. What you need to know from the get go - whether you've been charging through plastic for a few years now or have just started using them - is that interest rates are never constant, certainly not cheap and, lastly (and disappointingly), not tax deductible.

Knowing just the above few bits of information can halt you from conducting your credit card lifestyle in an ignorant, irresponsible or foolhardy manner. Being well armed with credit card interest knowledge can also ensure that you will not be in need of seeking any form of financial assistance in the future.

Variably Yours, Interest

You must realize that interest on credit cards is never set in stone. Rather, it is a fluctuating factor as interest is variable in nature, or prone to increase and decrease through time. Now, that actual rate that you or any individual credit card holder pays is composed of two elements: a variable benchmark rate and a margin. Also commonly known as the prime lending rate is the benchmark rate. And the margin is a fixed figure established by individual credit qualifications.

Realize that rates change. But, (and to your relief) they cannot go up indefinitely. This is so because within any credit card documentation there is information stating and specifying a maximum rate of interest that cannot be surpassed. Also, know that this maximum figure cannot be ignored, no matter what the benchmark rate is subjected to.

Interest Adds Up and Proves To Be Expensive

Before interest adds up through the act of spending and letting credit card balances sit unpaid for a while, interest is still an expensive figure, even from the beginning of a credit card balance's life. This is especially so if credit card debt balances are unsecured, which they are.

"What does unsecured mean," you ask? Explanation provided below.

There is debt that is both secured and unsecured. Secured debt allows lenders to take property in lieu of not meeting payment agreements on time. On the other hand, unsecured debt wards off the aforementioned; yet, know that lenders and/or creditors can still toss you over to collection agencies and can thus impair your credit report if payments are not met on time. This unsecured debt fact said, you can now surmise as to why credit card interest rates are higher than rates on other types of loans.

Sadly, Tax Deductibility Is Not Possible

Tax deductions are a convenient financial perk. Being able to note an items cost or value upon purchase, to which you can deduct from the gross amount of your personal taxable income, is quite a financial benefit - one that many take advantage of, especially home owners with weighted mortgage payments.

Yet, unlike mortgage interest tax deductions, which are commonly carried out, credit card interest deductions are non-existent and impossible. Sadly and simply enough, you cannot deduct the interest that is paid on credit card balances.

It's important to learn the ins and outs of credit card interest. For, if you don't, it's likely that you will at one point down the line need credit debt counseling or some other form of financial servicing.

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