With all of the financial innovations made over the past few decades, there are many financial products available that people can choose from to reach their financial and personal goals. Some of these products provide many more benefits than others and some should be avoided outright. Some financial products can be used if necessary, but only by those that understand the risks that they are taking by relying on these financial products. Here are a few financial products that you should be very wary of.
Reward Credit Cards
Reward credit cards can be very dangerous if not used correctly. Reward credit cards advertise great free items and cash back if you use the card regularly, but they often have some of the highest interest rates in the industry. People who carry a balance on these types of credit cards often end up paying much more to the company than they could ever earn in rewards. If you do decide to apply for a reward credit card, make sure that you are paying off the balance of the credit card each month to ensure that you are not overpaying in interest charges and other fees.
Payday Loans
Payday loans are another dangerous financial product. Many people that apply for them find themselves trapped in a cycle of debt where they are taking out one payday loan to pay off the last payday loan they applied for. The reason for this is the extremely high interest rate associated with the payday loan and the remarkably short time the borrower has to repay the loan, usually as little as two weeks. If you feel that you must take out a loan like this to handle a financial emergency, make sure you only take out the amount that you truly need and create a plan for repaying the loan within the time period without having to borrow more money.
Reverse Mortgage
A reverse mortgage is where a company pays you money to live in your home with the understanding that the money will be repaid if the home changes hands. This is advertised as a good way for senior citizens on fixed incomes to obtain some extra money during their retirement years, but with all the fees and charges added to the mortgage, some seniors and their families find that the only way to repay what is owed is to sign the home over to the lender. If you would like to leave your home to your family when you pass away or if there is a chance that you might ever be interested in selling your home for a profit, you may want to stay away from reverse mortgages.