Credit Cards

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Originally posted on Money with Merne’s Facebook Page on February 21,27,28, March 2, 2017:

The average amount of CREDIT CARD debt is….$16,061!

In the years that I’ve been passionate about finance, I’ve learned that the use of credit cards can be very psychological and emotional! Your use of credit cards is probably just based on how you saw your parents use them. You were probably never taught formally. I feel that most people just assume that everyone uses credit cards for things they can’t afford and are complacent with having revolving debt. While talking with a friend about credit cards many years ago, she told me that she only uses credit cards for big ticket purchases she knows she can’t afford. I cringed! In later years I encountered more people who acquired debt for school expenses, car repairs, medical bills, etc. Seemed a bit more understandable. Those folks were usually more in a rush to get rid of the debt.

You might be surprised to hear that I use credit cards for almost everything.  Why? I get lots of rewards points! I have 2 no-annual-fee rewards cards that I pay off every month. Since I track all my expenses versus my income in my budget spreadsheet, I know I’m only spending what I can afford. So basically, I’m getting free rewards just by spending the money I would already be spending.

I would recommend this to folks, but I know a lot of people who’ve had credit card debt don’t trust themselves to use credit cards. Hence why you need to know yourself! Maybe steering clear of credit altogether and using a debit card and cash is the best thing for you. To thine own self be true!

When shopping for credit cards, here are some things to consider:

  • Steer clear of cards with annual fees (they may have better rewards, but why would you pay someone else to spend your own money?).
  • The interest rate doesn’t matter if you are going to pay off the balance every month, but if you are carrying a balance and working toward paying it off, make sure you find a card with low APR.
  • If you travel abroad, find a card with no foreign transaction fees.
  • Find the rewards card that fits you!  Travel points?  Gift cards?  Cash back?  What will be the most valuable to you?
If you have had credit card debt and have paid it off, now what?  Are you planning to close that evil credit card account so you can never be tempted by it again? Think twice before you close that account! It can hurt your credit score! Your credit score is based on many factors including your debt to credit ratio – ie the limits on all of your cards versus the balances you carry on them – as well as the length of time you’ve had your accounts. If you close an account you’ve had for 15 years, you lose that history AND the limit! If you think you’ll be tempted by the card, cut it up or hide it away somewhere. If you have wayyy too many cards and you really feel like you have to close an account, make sure you close accounts opened more recently with lower credit limits. Always keep your oldest card open! And once again, make sure you get rid of accounts that charge annual fees!

 

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