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Credit Card Debt

Five Ways to Use Credit Cards Without Getting Buried in Debt

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Everyone knows the importance of using credit cards responsibly; the issue comes down to actually using them.

How do you use your credit cards to your advantage without also over using them to the point where they become a problem?

Let’s face it, credit cards are extremely user friendly!

Everything about them tempts you to use them even more.

From generous (and often rising) credit limits, to zero-interest introductory rates, to cash rebates and rewards, to the completely self-directed nature of the credit arrangement pull us into what is probably the most cozy relationship with any kind of debt we’ll ever have.

But credit cards are loans—as in debts that are required to be paid back.

If we ever lose sight of that we’re at risk of becoming credit card junkies or bankruptcy candidates.

How do we stay on the safe side of credit cards?

Read on and you’ll learn five techniques for credit cards to make sure you don’t get buried in debt. Remember, credit cards are a tool that can help us but only if we use them wisely.

5 Ways to Use Credit Cards Without Getting Buried in Debt

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New Credit Card Rules Take Effect

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Today is the day credit cards change ways they do business. Most of the rules in the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 are going into effect today.

Here is a rundown of what changes are taking effect (for more details see my article The Credit Card Accountability, Responsibility, And Disclosure (CARD) Act Of 2009- Effect On Credit Card Holders:
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Pay Off Highest Interest Or Highest Balance Credit Card – Analysis Paralysis

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The question comes up all the time when a person wants to start getting their credit cards under control – Pay off the cards with the highest interest or the cards with the highest balance?

On the one and you have high interest credit cards – A high interest rate costs you every month and compounds the amount you owe every month you aren’t paying off the entire balance.  High interest costs you for what you borrowed.  For some people the interest rate can close in on 30%.  That’s basically agreeing to pay one third more for everything you bought on the card (or more depending on how long you owe)!

On the other hand you have high balance cards – You’ve used the card so much that the balance may be in the thousands and no matter what you are paying the balance doesn’t seem to ever go down.  Even if you have a low interest rate you may be paying a lot of interest because of your high balance.
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Credit Cards Don’t Suck, You Suck!

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I wrote last time about how credit cards suck.

While that may be true at times, it may be more the truth that you suck!

Sounds harsh I know.  But a lot of people who have credit card problems need to take a deep breath and look at themselves.

Let’s look at some reasons you say credit cards suck but really you suck:

Late Fees Suck

They sure do!  That’s why they are there.  It’s meant to punish you for being late and hopefully you remember the next time to get your payment in on time.  If there weren’t late fees then everyone would pay late.  If you pay late once it’s an accident and you can ask your credit card company to remove the charge.  If you’re late more often then it’s all your fault and you have to look at your bill/pay system.  You know you can ask to have your due date changed, don’t you?

They Trick You on Rates

Look, they may put the details in small print but the details are still there.  If you didn’t read through them then that’s your fault.  Read the details and ask questions!

The Minimums Are So Low I Can’t Get My Balance Paid

credit card on computer keyboard
Are credit cards really to blame or is it your fault?

Every now and then we need a little help with our finances.  Something come up this month?  You can pay the minimum.  But if you make it a habit to pay the minimum and you can’t afford more then you have to look at your spending habits and your finances.  It’s not the credit card company’s fault you find yourself unable to pay more.

The Interest Rates Are Too High

Why are they high?  Probably because you don’t have good credit and you are a risk.  The credit card is giving you money remember?  It’s like an instant loan.  You know what it would take to go to a bank to get a personal loan just to buy a new sweater?  Very inconvenient!  That’s why the credit card company can charge you their rate.  If you don’t like the high rate then start paying off your credit card balance and make sure your payments are on time.  Then call them up and ask them to lower the rate.  And here’s something else – If you pay your balance on time every month then it doesn’t matter what the rate is because you won’t have to pay interest!

It’s Too Easy to Spend

C’mon!  Seriously?!?  Have some self control.  Take a look at why you think you need to use a credit card so often.  Why are you spending so much?  You can’t blame the credit card company because you can’t control yourself.

Stop blaming credit card companies!

No one told you to get a credit card.  OK, maybe it helps to have one to build up a credit history but it’s not their fault if you abuse the card.  Take control of you situation and start to do something about it!

What do you think?  Is it the spender who sucks?

Goals Are Great Motivators

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Marathon de New York : Verrazano Bridge

Goals can be great motivators to help you achieve! I find that when I have a specific goal it’s much easier to focus on what I want to accomplish.  For example: For me to save money is one thing but when I have something specific to save for I find that I can save up much quicker.  When I was younger I wanted a new stereo (the hand-me-down I was given still had an 8-track in it).  I made a goal of saving up for a new stereo.  When I sacrificed some expense for savings I knew i was to help me get that stereo.  When I worked extra hours in the supermarket I knew it was for the stereo.  In no time I had enough to go out and buy a new stereo, equipped with not one but two tape decks! (Have I dated myself or what?)

Let me give you some other goals I’ve set for myself and accomplished:

Ran the NYC Marathon – In 2005 I decided I wanted to run the NYC Marathon.  I knew I needed time to train and run enough races (you have to run 9 NYC RoadRunner races for guaranteed entree).  In 2006 I mapped out what races I would run to qualify for the next year’s race.  It was tough to keep up but I ran and finished all nine races for entry.  In 2007 I started a training program to get me in shape for the marathon.  In June I started my longs runs every weekend to get me ready for the distance.  The first Sunday last November I woke up at the crack of dawn and hopped on the Staten Island ferry to get to the start of the marathon.  Later that afternoon I would be able to call myself a marathon runner.  I don’t think I ever would have run the distance without a specific goal of running the marathon.

Paid off my credit cards – Some years ago I finally got fed up with how much I was paying monthly in interest for my credit cards.  I resolved to pay them off.  It started slowly but bit by bit I started to gain ground.  After an incident that led me to move back with the ‘rents I was able to turbo charge my payments and finish off my credit card debt.  I haven’t had more than a month’s charges since then (I pay my cards off in full every month).  Without resolving to pay off my credit cards once and for all I would still be idling along with minimum payments and a ton of debt piling up.

Started a personal finance blog/site – In October of 2007 I had discovered blogging via Zen Habits then Get Rich Slowly.  I was already itching to find something productive to do with my time and had healthy interest in personal finance.  I set a goal of starting up my own blog and making it successful.  I’m still in the middle of this goal but I feel like what I’ve done so far has been a success, especially when I look back at my first month of original posts on my Blogger site.  Without my goal I might be surfing fantasy baseball sites instead of writing this article.

Build up our savings – My wife and I wanted to make sure we had enough in savings for any emergency and then some.  Rather than hope to put some money away with what was left over at the end of every month we calculated a specific amount we could afford to do without and set up our ING savings to automatically withdraw money from our checking every week.  We have since achieved our emergency savings goal and exceeded it.  If we didn’t create a specific plan our savings would be considerably less and we’d be scratching our heads wondering where our money went.

The lesson here is that I was motivated to accomplish different things because I set a goal to achieve!  Having a goal in mind keeps my mind focused.  Without a goal set I would have just floated along in many cases.  My savings would be lower, my credit card debt still existing, my running much less, this site just a thought…

One way to accomplish a goal is to make it SMART – Specific, Measurable, Attainable, Realistic, and Timely. (Thanks to Cash Money Life for turning me onto that concept.)

I also like to think in terms of short and long term goals. For example – The goal of saving up for a down payment on a home, while an admirable goal, may seem a bit too big to ever accomplish.  That could be a long-term goal.  To make it more achievable you can create a short-term goal of saving X dollars a month towards a down payment.  This way you see your small goals achieved which helps build up the confidence to achieve your bigger goal.

Check out this article on the science of setting goals.  When you set a goal you are actively engaging your brain to help you with your goal!

What goals have you accomplished?  What are your current goals and how will you achieve them?

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photo credit: Martineric