Responsible Credit Card Use
Keeping track of your credit and using it responsibly is a large part of financial fitness. Here at BillCutterz, we believe that being credit savvy is just as important as getting your bills reduced. Rather than telling you to get rid of credit cards, I’m going to outline some tips to help you deal with them.
Start Learning Young
Talk to your children about credit cards. When they see you pull out plastic to pay for things, tell them what you are doing and why. For instance, if you always use a certain card for travel points, tell them that this is how you paid for the plane tickets for your last vacation. If a store ties its sale prices to using their card, explain you get a better deal with the card, and let them know that you budget for the bill at the end of the month. When the bill comes in, remind them about the shopping trip or vacation you took.
Start Kids with Secured Card
Years ago, credit cards companies advertised in student bookstores and all over campuses. Getting approved for a card was easy, and many students got themselves in a credit hole by careless use of credit cards. These days if you are under 21, you need a co-signer or verifiable proof of income to open a credit card. A simple solution is a secured card which is a credit card that has a limit equal to a deposit at the issuing bank. My niece and nephew had secured cards starting as juniors in high school, and their parents closely monitored them.
On this page, there are a few cards designed for students with the benefits of each explained, along with some great information on college credit use.
Track Your Spending
In a perfect world, we would all have great rewards on our cards, and pay off the bill every month. To do that, you need to keep track of how much you spend on them so that you budget for the bill each month. An easy way to do it is to put your credit card purchases in your checkbook register as if they were debits, then at the end of the month (or whenever the bill is due), you will have the cash to pay it off. If you aren’t at that point yet, here is a great payoff calculator to help you figure out whether a snowball or an avalanche is your best choice to knock out your debt.
Be Aware of Credit Costs
Credit spending costs more than you might think. For instance, if you have a card at 18% interest, a balance of $2400, and a minimum payment of $48, it will take you over 27 years to pay if off if you only make minimum payments. That works out to over $5500 in interest payments. Multiply that by a few cards, and you are paying a lot of money for things you may or may not need. Lecture over, and here is the calculator I used to figure that out.
One way to save on interest payments is to transfer the balance to a card with a lower interest rate. If you have decent credit, you should be able to find a low or no interest card. If your credit is shaky, you might need professional help to regain control. GreenPath is a great resource for that, and they are free to consumers.
Don’t Forget About Us
At BillCutterz we make it simple for you to save money. It only takes a few minutes to sign up, then we do the hard work of negotiating your bills for you.