Credit cards: The crazy little slips of plastic that seem to offer you anything you want, and then come back and slap you hard with dizzying interest rates, annoy you with persistent calls from collectors you’ve never heard of, and exhaust you even when you finally try to get rid of them. In a nutshell, credit cards can have all the drama and emotions of a bad relationship, but without the option to just dump them and move on.
In the next few weeks leading up to Valentine’s, we’re going to examine the types of bad relationships we often see with credit cards and how to fix them, so this Valentine’s, you can fall in love with your finances and buy the home of your dreams through our Path to Homeownership program!
This will be a three part series, with a new dramatic credit card relationship dissected by our counselors every other week.
First up, “The Emergency Card”.
“So I had this card, I gave it to my son. It was for emergencies only. But he was in college, and he didn’t know what I considered an emergency. I got a $300 bill he’d ran up on expenses his first month there. And not a single charge had to do with a car breaking down or a hospital visit.”
As they say, hindsight is 20/20. Al though it might not seem like much, giving a credit card to a someone else is the ultimate gift. It’s the opportunity for them to borrow money in your name, and you’re agreeing to pay it back. Every. Single. Month. And if you can’t pay it back right away, you’re agreeing to interest rates, high ones sometimes, and hits on your credit for carrying a high balance on the months you can’t pay it down below 30%. Or, even worse, there is the possibility of not knowing about a payment coming due or not being financially able to make the payment at all, so now it’s a late and really looks bad on your credit report. They spent the money, but now it’s your loan. And now it’s a liability that may even prevent you from being about to purchase your home and complete your Path to Homeownership program!
You see, when you are in the process of buying a home you need to be able to paint for the lender the most perfect, healthy financial picture of yourself you possibly can. And if you have a card out there you aren’t monitoring personally, it can run away from you in a heartbeat. As little as one late can delay your home purchase for as long as one year. And when you’re trying to complete the purchase of your home and get the lower payment that comes with bank financing, having a year added to the process can be anywhere from a couple hundred to a few thousand dollars that one late pay cost you.
So how do you monitor your emergency cards? We recommend online banking alerts. This is a service most major banks and credit card companies offer, where you can be notified when your card is charged for as little as $1 or as high an amount as you are comfortable with. This way, no matter who has the card; your baby in college, your mother at the nursing home, or your spouse out shopping, you’ll get an email or a text notifying you of each and every purchase above your alert limit. If you know what’s being charged on your card, you’ll be better prepared for the statement when it comes, and you’ll be in a better position to have an honest conversation about spending habits with your family member if you need to. Contact your bank to see if they offer the service, and take back control of your credit card!
Until next time…
The Counselors at Affordable Home Provider
Disclaimer: We are not a lender. We are not CFPs. We are Certified Affordable Housing Providers, committed to empowering families and individuals through our Path to Homeownership program to enjoy the American dream of homeownership. We are not a credit repair company. We are affiliated with local and national credit repair companies and lenders, who work with us to make the Path to Homeownership program a success so our residents are able to purchase their own homes.