Lots of people come to me, swearing they will never touch a credit card again, because they are so frustrated with the trouble they’re in. But credit cards don’t really need to be a problem. They can be quite an asset if used cleverly. With the holidays coming up, that’s a really dangerous time for credit card-aholics. So,let me give you a few tips to keep you safe.
First – The main problem with credit cards is that they are so easy to run up – you don’t see what you’re spending. Here’s a little trick you can use. Get hold of a check register (you know, those little books that come with your order of checks. Sometimes, you can get extras from your bank. Put it into a checkbook cover, along with your credit card. Then, every time you use the credit card, enter it in the register, as though it were a check. When you make a payment to the card company, enter it here as a deposit. You can keep track of the mounting balance and get a handle on your purchases. If you are not paying the whole balance each month, be sure to enter any interest or other fees.
Second – Understand that the funds from credit cards are loans. Often, the interest rates can be very high – 15% – 21% (even more). So, if you’re not paying the balance in full, at least pay the interest and some principal. Otherwise, you will never be able to pay the balance off. Remember, the banks are in the business of lending and making money – off your sweat. Don’t give them the satisfaction.
Third – better option – Now that you are using a check register and can see how much you are charging, think before you charge. Do you really need that? Will you really be using it as much as you say you will? When we got married, my husband and I paid about $300 to join Bally’s Health Club. After we started using it, we found that the facilities near us were to crowded and rarely went back.$300 down the drain. Do your research before you blow the dough.
Fourth – Some people are really clever. They don’t want to run up bills at all. I have some friends who only use credit cards so they can have records at the end of the year, or get mileage points or money rebates. They make sure they never spend more than they have in their bank accounts. That pretty much outsmarts the credit card companies – not only do they not make any money off their interest, but these guys get free travel all year.or checks every December. (Don’t feel bad for the credit card companies. They are still getting their pound of flesh from the merchants’ fees.)
Fifth – If you must run up charges, see if you can find cards that give you the lowest rates. If your credit is good, you can get long-term rates as low as 9% – or short-term rates from 0% – 5.9% for three to six months. I try to capture those low rates from all the solicitations that drop into my mailbox. When I have time to do my juggling, I can keep my average interest rates as low as 5% per year.
Some people, like my husband, use their cards as little as possible. Why? He hates to have a complete trail of all his expenditures on record. Don’t worry, he doesn’t do anything wrong or illegal. He just finds all that data a total invasion of privacy.
With all this pain, why would you even want to have a credit card at all?
Because you can’t rent a car without one – not even if you leave the agency enough cash to fully pay for the car. (I know. I’ve have friends who’ve either burnt their credit, or been eccentric enough to refuse to participate in that system. They told me they’ve tried to leave $30,000 in cash with Hertz, Avis and Budget and been turned down for a car. Maybe they just looked unsavory?<g>)
Because you need to build credit so you can get a house, fund a business, survive in today’s society.
Because, your TaxMama said getting copies of your lost credit card statements is cheaper and faster than getting copies of lost checks. After all, when they get audited, most people’s records seem to have mysteriously disappeared and we have to reconstruct. And if you’re going to use your purchases as business or job-related expenses.you’re going to need proof.
But, we’ll talk about that another time.
For now, just check your current credit and make sure that everything is OK.