|
 |
Home >> Lending >> Credit Cards
Playing the Credit Card Game
I recently ran into a friend recently who told me she was filing for bankruptcy. She blamed her financial woes on her inability to avoid the temptation of the credit card game. Too often, as my friend pointed out, credit cards are to many people like a poker table is to a gambling addict. Before the recession, the mantra would have gone something like this: "I really need that (clothing item/plasma television/vacation). I'll apply for this credit card, and use the available balance to finance the (clothing/plasma/vacation)." Unfortunately, with tighter finances and even tighter credit, the mantra has changed somewhat to: "I really need these (back-to-school supplies/gas/food), so I'll use my almost maxed out credit card to pay for the (pencils/gas/milk)."
|
|
Even though our objectives have changed, the abuse of our credit cards has not. Unfortunately, until we know when it is time to fold them and take our gaming chips home, we will continue to struggle with personal finance, long after the recession has receded. Below are three credit card games we need to stop playing in order to win some of our financial chips back.
Avoid the over-the-limit charges.
We have all been there. You know that your credit card has only a few dollars in available credit, but if you pay at the pump, the store will only pre-authorize your account for one or two dollars, thereby allowing you to fill up your gas tank. Had you filled up first and then paid in the store, your card would have been declined. While this seems like a safe way to play your cards, you certainly should have realized that every fill-up costs you $39 in an over-the-limit charge. It doesn't take a math whiz to figure out that this is a hefty price to pay. Consider the amount of interest the lender would need to charge you on your gas purchase to equal the interest charges. It would be illegal in most states.
Remember the adage that less is more.
With credit cards, less truly is more. That goes for the amount you charge on the cards to the amount of credit cards you have in your wallet. For every penny you do not charge, you have saved a percentage of interest, assuming, of course, that you do not pay your bill in full at the end of the month. Likewise, for every credit card for which you don't apply, your credit score thanks you. Besides the minor sting your score takes every time you apply for credit, when an actual person reviews your credit history, they will be unimpressed by a string of credit cards with $300, $500, or $700 credit limits.
Skipping Payments
Unlike a game of cards, skipping a turn is not ever helpful. You may have been there: skipping the minimum amount due on card #1 in order to pay card #2. The next month, you skip card #2 to catch up on either card #1 or another card. The cycle is repeating and never-ending. If you are careful about timing, you may avoid negative information on your credit report, but the payment merry-go-round is sure to end in disaster. Eventually, the late charges, the calendar juggling, and the stress will get you, and you will be forced to fold them. The only problem is that you will not have any chips left to cash in.
Published on BankingQuestions.com 8/21/09
|
| |
|
Accounts
Article
Q&A
Podcast
Video
Blog
Discussions
PDF
Powerpoint
