Some agree that credit cards give us great convenience, others see credit cards as evil who ruined their life. I was almost “ruined” by credit cards before I gradually know how to use it wisely. I’ve been a terrible loser on credit card issues. Over limit fees, late fees bothered me almost every month. What I paid was less than the financial charges. I worked hard every day to found my debt growing larger and larger.Now my life is getting better and better as I learned how to manage credit cards. I know there are millions of people like me, who are struggling with credit card debt, and I really want to share all of my tips.For different people, there are different strategies regarding credit card usage.1. Before you apply for a credit card, think more about what kind of person you are.
If you are not a self-controlled person, if you spend whatever you have, DO NOT use credit card. Once you get a credit card, you will take the credit limit as part of your savings, and finally use it up. And that is the most terrible thing for a credit card user. Imagine if you have a credit card with credit limit of more than $10,000, it will take you years to pay it off. Creditors like to allure your interest by offering high credit limit. Some even offer 0% APR for the first year. If you get on the hook, and used up the limit, it will take you forever to free yourself.
If you are not an organized person, don’t apply for more than 3 credit cards. Managing multiple credit cards is much more difficult than you thought. One more credit card mean one more bill, one more deadline. You have to pay them all in time to avoid late fee. If you don’t carry a lot of balance, you may need pay attention to the grace period to avoid interest. If you carry a lot of balance, and paying interest is no longer a surprise to you, you have to worry about the available credits of each card, you don’t want to go over limit.
If you are not a careful person, only apply for popular credit cards that are well known to most people. Don’t apply for store credit cards, or credit cards offered by small creditors that you never heard of. Yes, you are protected by law, and they are not likely to cheat you. But in their membership agreements, there may be special rules like hidden charges, obligations or anything you don’t want. Most people won’t be careful enough to read through all these agreements before signing them.
2. Do all what to can to avoid feesFees are one of the major income streams of creditors. But if you are careful enough, you can get rid of these fees easily.
Adopt an automatic payment system to avoid late fees. A lot of checking accounts have the capability to send payment automatically to credit cards. I use Bank of America checking account, it can receive e-bills from credit card companies and pay either the minimum or full payment automatically before the due date (you can set how many days ahead).
Keep a record of available credits of different cards to avoid over limit fees. You can attach a sticker to each card, write down your available credit on the sticker, and update the number whenever you swipe the card. I use the portfolio feature in Bank of America’s online banking to keep track of all my credit cards.
If your card has a low or zero introductory APR, keep in mind the introductory period, and try your best to pay off the card before the period ends.
Some store credit cards, like Bestbuy store card, offer no payment within certain time of purchase. Remember to pay off the amount before that period ends. Otherwise you will have to pay a huge amount of default fees!
Think twice before you take cash out of your credit card. Credit card companies tend to encourage you to use the cash advance service by sending your checks, giving you an ATM PIN… But don’t do that unless you have no other choice, cash advance fee is very high.
Some credit card offers 0% balance transfer promotion, which is misleading. Sometimes 0% balance transfer is not equal to free balance transfer. The 0% here means balance transfer APR, but they still charge you balance transfer fee (around 3-4%). Well, some credit cards do offer real free balance transfer, you just need to be careful and verify before you transfer.
3. If you carry high balances on one or more cards, following tips may be helpful for you to eliminate your debt.
DO NOT file bankruptcy until the last minute! Bankruptcy is listed in the top 5 life-altering negative events that we can go through, along with divorce, severe illness, disability, and loss of a loved one. There are plenty of things that you can do to change the reality.
If you don’t have a strong determination, pay off your debt from the card with lowest balance. send a little more than minimum payments to all your credit cards, and pay the rest of free money to the card with lowest balance. Keep the process going, and you will see your situation getting better and better.
If you have strong faith, try the more efficient method: pay off debt from the card with highest interest rate. Send minimum payment to all credit cards, and use the rest of the free money to pay the card with highest interest. This process could be hard, because you may find your self dealing with same amount of cards for a long time. But this the the most efficient way: total interest is the lowest.
No matter which method you use, use up all the free money, your savings account’s interest rate is much lower than credit card’s. Just be sure you have enough money to survive…
If you are not self-controlled, cut or dump your card when you pay it off. Otherwise you will use it again, and all your previous efforts will be spoiled.
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