The Do’s and Don’ts of Managing Credit Wisely

Get your credit card debt under control! Why does it matter if you have credit card debt right now, if you’re not planning to retire for another 20, 30, or even 40 years? The answer is simple—if you have credit card debt now, chances are you’re paying interest each month instead of investing that money. There are many strategies for managing credit card debt, some of which are outlined below. If you have credit card debt, start getting it under control TODAY!

The Do’s and Don’ts of Managing Credit Wisely

DO use credit cards for emergencies/convenience only and pay off all balances each month.

DO alter your spending habits so that you will have some extra money to put toward paying down your credit card debt.

DO pay more than the minimum amount due if you can not pay the total balance.

DO transfer balances from higher interest cards to lower interest cards. Note: some balance transfers are treated as cash advances and charged a high interest rate. So make sure that you aren’t increasing your interest rate by doing a balance transfer. Also, don’t forget to read the fine print. Many credit card companies charge a fee for balance transfers of 3% or more of the amount transferred. Take any fees into account when deciding whether to do a balance transfer.

EXAMPLE: Lets say you have 4 cards with balances. The interest rates on your 4 cards are as follows: Card 1—10%; Card 2—15%; Card 3—16%; and Card 4—25%. Transfer as much of the balance as possible from Card 4 to one of the lower interest cards—preferably Card 1. Be sure to find out what “balance transfer rate” Card 1 charges to ensure that you will be paying less than 25% on the money you transfer. Then pay the minimum amount due on cards 1, 2, and 3, and pay as much as possible (significantly more than the minimum due) for card 4 until you pay it off. When Card 4 is paid off, pay minimums for Cards 1 and 2, and pay as much as you can for Card 3… You get the idea.

DO review your credit report to ensure all information accurately reflects your credit history.

DO take advantage of your improving credit score by doing balance transfers as described above. Your goal is to pay your cards off ASAP while paying the least amount of interest possible!

DON’T spend more than you make. If you spend more than you bring in, you won’t have anything to invest. Even if you invested some share of your earnings, any appreciation would likely be eaten up by the interest you accrue on your debt.

DON’T miss payments, or make late payments

DON’T take out a cash advance to LEND money to someone. Even if they pay you back you will probably be charged a higher rate for the cash advance and your credit card payments will be applied to your cash advance balance last.

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