Credit cards can also have a bad reputation
Everyone is an expert in one area or another, and what seems to stand out from my research on this topic is that most credit card experts have never worked for a credit card company. . Even the individuals who appeared summary. As for me, I do not pretend to be an expert on the subject. What you will read here is a summary of the information I have gathered. I will try to make it perfectly clear and subjective. At the same time, I must emphasize that there is little objective evidence to support most myths circulating on the Internet.
First, let us answer a question about debt and credit cards. In my research, the current investigation escapes credit cards rewarding debts. The definitive answer is a "kind of" emphatic. In fact, it's quite the opposite and the reasons seem logical. The rewards that can be received with low or no debt are a wider acceptance for more credit, which means that it is easier to get a personal loan from their local bank. Interest rates also decrease because of the fact or the assumption that they pay their bills on time, by keeping all credit cards with a zero balance, which avoids the creation of 39, a bad debt.
On the other hand, a person with a relatively large debt is penalized by higher interest rates and a limited choice of resources for personal loans. The definition of what is a bad debt is an arbitrary conclusion that is really determined by the circumstances. The bad debt can be seen as a debt whose initial loan is at a high interest rate. For example, getting a 4.5% home equity loan is not a bad debt, nor is the purchase of a car or a motorcycle with a rate of over $ 50,000. interest of 7%. What would cause a bad debt in this scenario is if the car or motorcycle loan is in default for any reason. At the same time, having multiple credit accounts open at the same time and keeping outstanding balances some close to the limit is another example of a bad debt.
A debt is good
Carrying a certain level of debt is sometimes unavoidable. However, credit card companies reward people whose credit score is in the high end of the spectrum, between 650 and 850, with lower rates and higher limits for their accounts. The full range of typical credit ratings ranges from 300 to 850 points, where 31% of that number comes from the amount of a person's debt. The more a person incurs in debt, the lower his score will be.
In many cases, a person's debt comes from credit cards, generated by voluntary means, indicating that the person has applied and has been accepted as a tangible credit risk due to his current score. Notice that I said score, not evaluation. Ratings relate to items such as mortgage-backed securities or corporate bonds, not "Joe consumers". Credit scores are what the consumer gets through a credit report, which lists creditors, personal information, inquiries and collection items, all about loans and outstanding loans.
The best way to avoid debt is obviously to pay everything and nothing in advance and in cash. Very few of us unfortunately have this ability. With this in mind, we should consider when working with a credit card that it is important to pay for it in full on every occasion. This avoids unnecessary interest charges due to minimal or missed payments. Again, this is an example of a bad debt in which missed payments that pay only the minimum occur. This will only hurt a person's credit in the long run.
In the case of home loans and auto loans, paying a few extra dollars each month is added and may reduce the interest on these loans. Faced with this, a good portion of a mortgage payment is based on interest. This same thing is with a car loan. Naturally, at this point, the controversy surrounding credit cards for debt has been resolved. Credit card companies reward relatively low debt and penalize relatively higher levels of debt. That said, less debt or almost no debt means better / lower interest rates with a greater chance of accepting personal loans. Where it is quite otherwise, in cases where the level of debt is high.