Tuesday, December 22, 2009

How I Use My Credit Cards to My Advantage

Buying large purchases on credit is something just about every adult American today does. Debt is just a part of life for most people. Debt alone isn't so terrible, most people couldn't buy a car or house without putting themselves into debt.

The real killer is interests rates. Paying $1000.00 off over the course of the year sounds great, until you do the math and realize you'll pay an extra $600.00. This assumes a 20% interest rate paying $40.00 a month.

Of course all different people have different interest rates and minimum payments, but it adds up very fast and also take a long time to pay off the debt. That thousand dollars could take you 118 month to pay off at the rate I mentioned.

That's almost 10 years!

Don't forget about all the other ways your credit card company will keep your in debt. Many companies offer a payment protection that costs something small like say, $1.00 for every hundred of debt you have per month. It sounds small, but that extra charge you incur every month will just add to the time it takes to pay off your debt.

All of this assumes you aren't making any more purchases with your card, if you are, of course you will stay in debt longer (their goal would probably be forever) and pay mountains of interest.

So how do you escape these insane fees?

Not getting into debt, or at least getting into debt with low interest rates is a good method. Of course this means you'll have to wait longer to buy what you want, but it will save you thousands in the end.

Another way to avoid paying thousands in debt is to pay extra each month. Just paying an extra 10$ a month can do a lot, but that's still giving up too much in interest for me.

When I get into debt I pay it off as quickly as I possibly can, either within 2-3 months if possible. This keeps my payments towards interest minimal but helps me buy items I would normally have to save for.

With my main credit card I actually make a payment every week or so. I use it for all my normal buying like groceries, gas, clothes, etc. I pay the balance off weekly and never have to pay interest or finance charges. Not only that but it lets my card company see my buying habits and helps me earn a higher credit limit which also helps my credit scores.

That's all for now, I'm sure I'll write more on finances later, they are a strong point of mine.

Have anything to add or something I forgot? Questions? Comments? Leave them below, and don't forget to follow me!

No comments:

Post a Comment