Watch your credit cards, you may be losing money.
Credit card (and other) debts can grow like weeds. Try to tame the it before debt gets out of control. Fixing one habit at a time works, trust me. If you use credit cards or have credit card debt, you have to be diligent with handling them.
I’ve learned quite a lot from personal experience. My first credit card ever was from Citibank when I turned 18. I thought it was so cool to have my own card, even it was only a $300 credit limit one. It had a “low APR” of 14.99%, which jumped to 25.99% in 6 months. Within a week I spent half of my limit. Looking at some old receipts, it seemed like I spent it on a mixture of eating out, gifts for family (I felt good at the time about that), and car repair.
I know while handling credit credit card is a simple process, it’s not easy to actually do and get started with. The key for me was being informed and automating my system.
Review your monthly statements.
Identity theft is becoming more common and a good habit is to look at your statements every month. Sometimes credit card companies make mistakes on charges. I log in to my credit card account every couple of days to see if anything suspicious happens. I need to work on checking my paper statements.
When you review your statements, see if there are any updates or changes to the interest rate or fees. The complete disclosure about credit card fees is long and verbose. Double check to make sure your interest rate hadn’t increased dramatically. A friend told me that her American Express credit card had an increase even though she has never been late with a payment.
If there is an annual fee for your card, I’d get another card or negotiate that off. Why should you be charged a fee to be a cardholder? Basic credit cards that don’t have rewards or low interest rates shouldn’t have an annual fee on the card.
Pay your credit card bills on time.
A good credit history can help you when looking for a mortgage for a home as a higher credit score leads to lower interest rates. Credit cards are notorious for charging their customers $39 for later charges and $39 for going over the limit. That can be $78/month added to the balance not including the interest. Do yourself the favor and pay on time and keep it under the limit.
Another way credit card companies make their money is by charging you $15 to make a payment over the phone. I can’t think of another provider that charges you for paying them over the phone. Try to mail/send your payments a week early, but if you have to pay $15 to avoid $39 or higher, then suck it up and pay the fee. Automating my bill payments online has made my life much easier and has kept me from having late fees added to my bills.
Pay as much as you can. (Pay in full is best)
Credit card companies might call you a “deadbeat“, but at least you’re not tied to them each month. If you can’t, then pay as much as you can. Do not just settle for minimum payments. If you’re unable to pay the minimum for your credit cards, call them to set up an affordable plan.
With the recession, some companies are willing to work with you. At the very least, ask them to waive fees and lower your interest rate. Again, some credit card companies are more willingly to work with you as the economy has hit many families hard. They would rather get some money than no money. Get your payment plan in writing to protect yourself.
Build your income or reduce you expenses to increase your debt reduction payments and eliminate your debt.
Try a debt snowball or even snowflaking some more into your monthly credit card payments. Pay more than the minimum on the highest interest rates first and continue down your credit cards in descending order. When you pay off the first card, put all the debt payments from it into the second card and continue until you have paid off all your debts.
NEVER lend your credit card to anyone!
This account is tied to YOU and you will be held responsible.
Your Take
How are you handling your credit cards? If you have credit card debt, how aggressively are you attacking it?
Photo Credit: quaziefoto
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We have one credit card and pay it off each month. We’re careful not to put more on the card than what we can pay off quickly so that we avoid interest charges. I see the credit card as a convenience tool, but it should never be used to buy something you really can’t afford. That’s where the trouble begins. I also think the credit card can be used for emergencies if you don’t have a fully funded emergency account. While it’s better to have cash savings on hand for emergencies, in reality, not everyone has been able to build up 3-6 months worth. The credit card, although not preferred, can fill the gap until there is enough savings.
I’m glad you use your card as a convenience and not a crutch. We also try to limit using the credit card.
Good insight here. So many of the problems with credit cards really start with the work-a-day management, where it’s easy to get sloppy.
Let’s face it, paying bills isn’t one of the more enjoyable things we do, and it’s real easy to get involved in creative avoidance schemes to avoid doing it. It’s easy to forget too that credit card management really is a discipline to be learned and practiced.
Alas, spending is more fun than paying!
If one commits to paying off the card balance in full every single month then credit cards can be a great source of cash back or other forms of rewards. If one cannot pay off the balance in full each month then maybe they should reconsider using a credit card in the first place.
Good advice. I still have my first credit card (which I used pretty well, in spite of never really being told or shown how to handle credit), but I’ve since gotten another card that offers more rewards. Always nice to get a reminder to watch my credit cards closely (I’ve been slacking a bit on that lately, with the holidays coming up).