Credit Cards

At some point and time, I think we’ve all spent money on something and thought later that it was a stupid way to spend it. But what about all the money we waste without thinking about it? We don’t even get to regret it because it’s almost like it unconsciously floats out of our accounts. Are you wasting money in any of these 3 dumb ways?

1. Unnecessary bank fees: In my next life, I’d love to come back as a bank. Goodness knows, I’d be rich just from collecting fees from my customers. These fees can come from:

• Writing more checks than you’re “allowed” that month
• Using ATMs outside of your bank’s network
• Not maintaining a minimum balance
• Arbitrary maintenance

I’m sorry, but I think it’s crazy to have an account at any bank that charges you fees for these things! Because all banks do not do this. There actually exist some banks who don’t nickel and dime you and trust that you’re adult enough to write the number of checks you want to each month. Loyalty is one thing, but handing over money when you don’t have to is reason enough to break up. 

2. Credit card fees: If you’re with a credit card company who charges you an annual fee, ask yourself why. Why? When there are other companies practically jumping up and down to lure you in give you a card with no annual fee? I know that a lot of secured credit cards come that way; if you’ve had credit trouble in the past and this is one way you’re trying to rebuild your rating, you may only be able to get a secured card. Do your homework and find a card with a low fee, but that also comes from a reputable institution, such as a Top 10 credit card issuer. And above all, don’t make late payments. That’s usually $30-$40 you’re handing over, even if you’re a day late.

3. Avoiding coupons: Some businesses are actually trying to help you save money these days, so why would you avoid them? It may take a little more time to take advantage of coupons, but it’s worth it. In the Sunday newspaper, in your mailbox, online – coupons are readily available. If you still don’t want to take the time to cut them or print them out, at least sign up for a grocery store card. They’re almost always free, you can get a keytag version to clip onto your keychain instead of digging it out of your wallet and the store sends you flyers to alert you to upcoming specials.   

No one said saving money was easy; sometimes you really have to research and do the legwork to figure out how to do it. But keeping your hard-earned money instead of wasting it in one of these three ways should be way more satisfying than being “convenienced” out of it. 

All right, you’re here because you want to get rid of your credit card debt once and for all. The stress of high debt and possibly late payments has finally gotten to you and you want out. Of course, the amount of time it takes for you to get rid of your debt depends on how big your debt is as well as how much income you have coming in, but everyone is capable of paying off their credit cards if they’re willing to do the work.

There’s a right way and there’s a righter way. Doing it the righter way is smarter. So how do you do it?

Steps to Get Rid of Credit Card Debt

• First, you have to be willing to stare your debt in the face. Surprisingly, so many people are afraid to do this. It’s just pieces of paper, people, not snarling Rottweilers! You need to get all of your current credit card statements together and sit down with them. Arrange them from highest interest rate card to lowest.
• Next, add up what your total minimum payments are for all of your cards together. Don’t worry, you won’t be making these minimum payments—you’ll be making more than the minimum if you can afford to. Paying above and beyond the minimum will erase this debt more quickly. Just paying the minimum keeps your debt-escaping momentum practically inert.
• Determine what amount of money you can realistically afford (over the minimum) to pay on your cards each month. This can seem like a scary number, but remember, it’s just digits. This isn’t a time for fudging or being dishonest, either. If you’re unwilling to write down the right number, you’ll only drag out your financial mess even further. For example, let’s say the figure you can pay every month toward credit card freedom is $500.00. You have three cards and the total minimum payments for each come to $300.00. Now tally your minimum payment plus an additional $10.00 on each card; your total payments are now $330.00. Subtract that from $500.00 and you have $170.00 left over. Add that $170.00 to your payment on your highest interest card and pay that amount every month until that card is paid off.
• Don’t quit. However, once that high-interest card is paid off and you’ve closed the account, don’t subtract the amount you were paying from your total $500.00 monthly allotment. Continue to pay out $500.00, but now use the “extra” money from that previous payment toward the next highest interest card. Rinse and repeat until all of your credit cards are paid off.
• And in case it’s not obvious, do not continue to charge things.

In the meantime, it’s in your best interest to call your credit card companies and ask for lower interest rates. I know this sometimes seems like a hassle, but all they can do is say “no.” If you’ve been making your payments on time, however, there’s a good chance they’ll say “yes,” especially if you mention that you’re thinking of switching over to another company’s card. Isn’t spending a few minutes on the phone (okay, half an hour…okay, an hour…call at off-peak times!) worth the amount of savings you can accrue? This is interest you don’t have to pay, which is almost like tossing dollar bills into a fireplace. Wouldn’t you rather make a call and endure just a little elevator music instead of tossing your money away?

Credit cards are so easy to get and abuse. After all, how many credit card offers do you have junking up your mailbox on any given day? They’re so tempting, promising 0% interest on balance transfers until next year or a low introductory APR. They’re attractive, they’re seductive and they’re dangerous if you let them take over your life.

What, you say. Take over my life? Don’t be silly.

But use them the wrong way and you can get behind on your bills, which is compounded by a sudden increase in interest rates (because you did read the fine print that says the company is within its rights to spike your rates if you’re a day late with payment, right?), leading into a spiraling vicious cycle that includes calls from creditors day and night, at home and at your job, as well as the inability to get more credit. See how it’s taken over?

One of the best ways to avoid all of this is to use the credit cards to your advantage, which so many people don’t know how to do. Credit cards don’t have to be all bad, but not knowing how to use them correctly can lead to all kinds of catastrophes, including a credit rating so low that you won’t be able to get credit for anything.

Keep it at Zero

How do make credit cards work for you? By using them for small purchases that you can pay off completely when the bill comes. I know this isn’t always possible; if you’ve already racked up huge credit card debt, this is going to seem impossible. However, if you’re just starting out and you want to avoid trouble down the line, remember to keep your credit card balance at zero.

But this won’t build up my credit rating, you say. How will I build up credit to buy things, like a car and a house?

You can, but do it wisely. Charge something small and pay the balance off when it comes. Completely. If you think you need something next month, charge it and again, pay your entire balance. What this does is establish your credit rating: you pay on time and you pay in full, which looks good on your credit report, leading to a higher score. Sure, you can maintain a balance and continue to make payments on time, which is favorable, but your main financial purpose should be to avoid credit card debt as much as possible. Carrying balances over seems harmless enough if the balance is low, but what happens when an emergency occurs and your balance is suddenly hundreds of dollars higher?

Avoid High Interest Offers

Store credit cards are notorious for having higher interest rates than standard cards, no matter how good your credit is. Therefore, before you take on one of these too-good-to-be-true store offers, read the fine print and read it well. Better yet, just avoid them altogether. If you absolutely have to have something from a department store, charge it on your bank-issued credit card. And then, pay off the balance when the bill comes.

It’s much harder to pay off your balance in full when high interest rates jack up your payments. If your credit history is already spotty and you have a high-interest card, it’s going to seem difficult to get out of this trap. However, the best thing you can do is make more than your minimum payments on time each month while, at the same time, not charging anything. After establishing an on-time pattern, call your credit card company and ask if they’ll lower your interest rate. If you have to resort to telling them you’re thinking of switching to another company’s card due to your current interest rates being so high that you’re having trouble making payments, then do it. You don’t have to play nice with credit card companies. Do you think they’re sitting in their offices worrying about your interest rates? Then don’t worry about their feelings. They’re big companies; they can handle it.           

By now, you probably know whether or not you’re good with money. If you’re reading this, chances are you’re not as good as you’d like to be. While much of whether or not you save money well can be traced to your particular personality, it’s not set in stone that you’ll be a free spender all your life. There are ways you can take control of your personal finances and change yourself from an irresponsible money handler to a person who not only knows the value of a dollar, but how to hold onto it.

Learn New Tricks

You can’t teach an old dog new tricks, so the saying goes. Lucky for you, you’re not a dog. No matter how old you are, you can learn new habits. You can learn to change from a spender to a saver. Granted, this is going to be easier for some than it will be for others; yes, it requires some willpower, which some people naturally call upon in abundance. For others, it may be more a matter of tricking themselves. It doesn’t matter what means you use – it only matters that you reach appropriate ends, which result in you having more money in your account and less debt.

If you habitually find yourself wondering where in the world your money went, try these tricks to help track it down: 

• Keep a daily budget journal: It’s not good enough to try and remember what you spent money on over the course of a day. It’s too easy to forget that $4.00 cup of coffee that you grabbed from the drive-thru window or the $5.00 keychain you picked up for a friend. It may sound like small amounts here and there, but over the course of a week, you can unconsciously spend any amount of money from $20.00 to $100.00 and not have anything to show for it. Think it still sounds like spare change? Try looking at these small expenditures over the course of a month. It’s imperative that you carry a notebook with you at all times. Anytime you pull out your wallet and hand over cash, credit or debit cards, you need to write down how much you spent and what you spent it on. Once you’ve done this for a couple of weeks, you can see a pattern of how you spend your money. Are you dropping dollars on unnecessary trinkets? If so, now you know that and can take action to prevent it. 
• Use the envelope system: I know, you’re not eight years-old and it can feel silly placing money in envelopes every month so that you don’t overspend. But how has your money management system worked so far? If it hasn’t, then try the envelope system. After paying your bills, take the money that you have left over for the month and divvy it up. Some of it should go into an interest-bearing savings account. Then you’ll have to ration out some for groceries, gas, personal items, fun stuff, etc. You need to determine what average amount you spend on these necessities every month. Mark envelopes for each and place that amount of money in there. Once that cash is gone, it’s gone for the month. No cheating allowed! No running up to the ATM because you want to have more fun than that envelope allows. This may be extremely difficult at first, but only by sticking to the plan and not cheating are you really benefiting yourself.        

Use Your New Tricks 

All of the tips and tricks won’t do you any good if you’re not willing to implement them. If you’ve been a diehard spendthrift your whole life, yes, it’s going to be difficult at first. No one said saving money was easy! But you have to ask yourself if you can keep repeating the same destructive patterns over and over (digging that financial hole even bigger) or if you want to take control of your money instead of letting it control you.   

• Carry cash: I don’t care what the commercials on television want you to believe, cash is still cool. Sure, you can swipe that debit card all day long; it’s so easy to do, especially when you don’t have to sign for anything, that you can end the day forgetting about all the times you swiped your card. Instead of using your debit card, carry cash. It may not look as if you have as much money as you think you have when you constantly have to pull it out of your pocket and watch the pile grow smaller. 
• Save credit cards for emergencies: Emergencies include car repairs and home repairs — not that $300.00 purse that every Hollywood starlet and New York socialite is on a waiting list for. You don’t need to carry your one emergency card with you every day. It’s best left at home, where it’s safe from tempting gadgets and accessories.      

Once you’ve gotten over the initial hurdles and made these tips into daily habits, it will get easier. You’ll watch your savings grow bigger while your debt grows smaller. And that’s a very satisfying change to make, no matter how old you are.