Credit: Credit Cards vs. Line of Credit
Here's a little trick that I learned thanks to my financial advisor that has already saved me hundreds of dollars. Get a line of credit instead of a credit card. This is an option that banks and credit card companies would rather you not know about. I say this even though banks offer both these products when it comes to credit. The fact is that banks can make much more money on you with a credit card than with a line of credit. Why? Because, most credit cards have very high interest rates that are charged on the total you spent and didn't pay off in full. A line of credit however carries a much lower interest rate that is usually linked to the prime rate. You only pay interest on the amount that you used for the time that you used it.
In essence a line of credit is like having a preapproved low interest loan available to you 24/7 without having to apply for it each time you need money. You can pull money from it directly from an ATM machine or transfer money from it to your bank account via internet banking.
Another advantage of a line of credit is that there are no yearly fees as with many premium credit cards. You only pay interest on the amount that you borrow for the time that you borrow it.
In addition some banks allow you to pay back a minimum payment of only the interest owed on the amount borrowed or some small percentage of the amount borrowed like 3%.
I didn't give numerical examples here because I advise you to discuss this option with a financial advisor who can analyze your situation and give personalized recommendations. If you don't have a financial planner, get one, this alone can save you tons of money and accelerate your financial independence. Just be sure to look for one that doesn't work for a bank or a mutual fund company, these so called financial advisors are really just glorified sales people - I know because my cousin works at a bank. Look for an independent advisor who can offer you products from any company, they usually give better, more objective advice.
"Consumption and consumer debt are the plagues of our generation."
In essence a line of credit is like having a preapproved low interest loan available to you 24/7 without having to apply for it each time you need money. You can pull money from it directly from an ATM machine or transfer money from it to your bank account via internet banking.
Another advantage of a line of credit is that there are no yearly fees as with many premium credit cards. You only pay interest on the amount that you borrow for the time that you borrow it.
In addition some banks allow you to pay back a minimum payment of only the interest owed on the amount borrowed or some small percentage of the amount borrowed like 3%.
I didn't give numerical examples here because I advise you to discuss this option with a financial advisor who can analyze your situation and give personalized recommendations. If you don't have a financial planner, get one, this alone can save you tons of money and accelerate your financial independence. Just be sure to look for one that doesn't work for a bank or a mutual fund company, these so called financial advisors are really just glorified sales people - I know because my cousin works at a bank. Look for an independent advisor who can offer you products from any company, they usually give better, more objective advice.
"Consumption and consumer debt are the plagues of our generation."
posted by X at 12:19 AM
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