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How to Start Smart with Credit Cards

How to Start Smart with Credit Cards

In a perfect world, I don’t believe anyone would use a credit card for much - essentially paying for something you can’t afford at the moment, but I don’t believe I need to tell you that this isn’t a perfect world, and sometimes things just happen requiring that extra ‘boost’ of credit to get you through. Well, if you use credit cards or are thinking about getting your first one, here’s a sage system of advice for how to start, or tame your financial situation wisely.

Don’t Carry it With You

  • Out of sight is out of mind. A credit card in your pocket is usually a temptation for a “quick fix.” An item may only be $5.00 today, but if you do that once a day for a month, before you know it you’re due for a minimum payment and every $5.00 item you bought has suddenly become more like $5.06 thanks to the interest the bank tacked on. Keep it at home in a secure location, this will force you to think about where you’re going and what you’re doing and that you will need the card to do it.

Better yet, FREEZE!

  • An even better technique for keeping yourself from impulse spending on the credit card in this time of instant transactions online and at home, is to take your credit card, put it in a sealable plastic baggie (like a Ziploc sandwich bag). Fill the bag with water, and put it in the freezer. In a few hours your card will become unusable without time, thought and effort. Still available if you really need it, but not quite appropriate for impulse buys, which is as it should be.

Pay Off - Every Month

  • Finally, the smartest thing you can do with a credit card is to treat it as a loan to yourself from yourself, rather than from the bank to you. The way you do this is by deciding to pay the balance off every month before the bank can send you a bill. If your bill is usually processed on the 5th of the month and arrives at your house on the 7th, replete with interest charges, decide that you will always pay off your loan to yourself (credit charges) on the 2nd of every month. So if you charge $100, make sure you save up $100 cash to send to the issuing company at the end of the month. They will not be happy because they can’t make any interest off of you, (which was the whole point of giving you a card in the first place, as far as they’re concerned), but they will increase your credit score after awhile.

You need to remember that while those nice people at the issuing company were ‘generous’ enough to give you a card - they’re not your friend…not really. You are a means for them to make money, nothing more. Most Americans oblige them and dutifully give them interest payments every month to the tune of several billion dollars per year. Be different, keep the change for yourself!

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