Since the financial crisis begun in earnest more and more of us each day are receiving message from banks, private businesses and consultants who say that they can help reduce our debt. Okay initially these programs may sound attractive but in fact they are traps that could result in you finding yourself deeper in debt. In this article we offer some advice about how to avoid 5 common debt traps that you may be faced with.
Trap 1 - Low or No Interest Rate Credit Cards
A lot of banks are actively sending out offers to us every day in an attempt to try and get us to take out a new credit card through them. These may seem okay initially however as soon as you make a late payment or don't make a payment at all the low or no rate interest offer will no longer be valid and in the future they will charge you the normal high rates of interest on many money that is outstanding on the card.
Trap 2 - Balance Transfer
Many credit card companies are looking to get you to transfer the balance on your current credit card to theirs because they will charge you a much lower rate of interest. But once again if you can not adhere to the restrictions that they put in place on the new card then you could find yourself faced with even more debt than you had on your original card.
Trap 3 - Contracting With A Debt Consolidation Service
Many of these companies will promise that they will work with your creditors in order to help you sort out your debts. However do be careful as a lot of these will change the terms of your plan without any prior notification as the creditors have decided to change the terms of theirs. Plus you must also understand that some of these companies will ask you to pay quite a big fee in order to enter their program and this could only lead you to having more debt to contend with.
Trap 4 - A 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
Buying when the sales are on seems like a great idea to save money but if you use a credit card to make your purchases you need to be careful. Remember if you cannot pay the whole amount back the following month then of course you will be faced with having to pay interest on top of the money that is owed. So as a result this will in turn cause your bargains to actually become yet another one of the 5 common debt traps that you have been trying to avoid.
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