Take Charge of Your Credit Cards
Ten wise ways to make credit cards work for you, plus the new legislation.
In this show, I’ll offer ten ways to use credit cards wisely and share some thoughts on the upcoming credit card legislation.
Credit Card Caution
If you listened to last week’s show, Five Financial Tips for New Graduates, you know that one of my tips was to be very cautious with the use of credit cards. That’s because of all the ways people can get themselves into financial trouble, credit cards tend to be the most common accessory to the crime. On the surface, credit cards seem so flimsy and innocent. Who could imagine their ability to body slam your financial well-being when you least expect it?
Credit Card Defense
Not only have credit cards been incredibly easy to get, but their unpaid balances are one of the most expensive types of debt to have. And, of course, we all know how easy they are to use! That’s a triple whammy that can really work against anyone who lets down their financial guard, even for one shopping trip. But despite all the potential harm that credit cards can inflict, they have a beneficial side, too. So I wanted to follow up this week with tips about how to use them wisely and to give you a bit of information regarding recent legislation. The law is called the Credit Card Accountability, Responsibility, and Disclosure Act (or Credit CARD Act) of 2009.
More Accountability and Responsibility
The new credit card regulations will be gradually phased-in, with the earliest starting in August of this year. They’re intended to protect consumers from various fees and surprise interest rate hikes on their existing balances, among other sweeping changes. The banking industry opposes the legislation because they fear it will make them less profitable. Many predict that you can expect to say “bu-bye” to a lot of the lucrative benefits—like reward points and cash-back bonuses—that responsible card users have been enjoying. And it’s been suggested that the new rules may result in a tighter credit marketplace where it’s more difficult to even get a credit card, especially one with low-interest or no annual fees. I’ll put a link to the key provisions of credit card reform in the show transcript at moneygirl.quickanddirtytips.com.
Tips to Make Credit Cards Work For You
Here are ten tips to make credit cards work for you, instead of against you:
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Send an extra payment or two each month. Sending more than one payment in a billing cycle to your credit card company can really help you stay caught up with your charges and stay on budget.
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Use float time. This is the exact opposite of tip number one, and is meant for the most disciplined of credit card users only. If you can manage your credit card balance by sending just one payment a month, you are effectively “floating” your purchases. That means you get to use what you buy before you have to pay for it. You can potentially profit from interest earned on that money during your credit card’s grace period.
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Enter charges in your check register. Once you buy something with a credit card, enter it just as if you wrote a check or used a debit card. That forces you to deduct the amount you charged from your available balance and to keep yourself financially honest.
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Benefit from rewards. If you pay your balance in full each month, you can take advantage of a reward card that will usually come with a higher-interest rate. This is the main reason I use credit cards, so I hope the new legislation won’t put a complete damper on rewards.
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Protect yourself from problems. If you make a purchase that leaves you dissatisfied, most credit card companies will suspend the charge until the issue gets resolved. If the merchant is at fault, your money can be reversed out of their bank account, so you don’t have to pay.
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Choose your card wisely. If you do need to carry a balance for a special, large purchase, only charge it to a low-interest card. Right now, annual percentage rates that don’t exceed 8.99% are generally considered low-interest. Find some of the best rates available at bankrate.com. Why pay more interest than you need to?
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Get free card benefits. Even if you don’t have a rewards card, some cards offer extra freebies such as travel insurance and extended product warranties. Be sure to read your card agreement so you’ll be familiar with all its benefits.
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Manage your money electronically. Most of the large credit card companies have websites that allow you to download transactions into financial programs such as Quicken, QuickBooks, and Microsoft Money. That can save loads of time and make it easy to do budget tracking.
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Shield yourself from fraud. A credit card gives you more protection than a debit card if it’s stolen. You can only lose a maximum of $50 if unauthorized charges are made to your credit card. But you have unlimited liability for debit card fraud that isn’t reported quickly. Get more information about this in Money Girl show number 82 which was devoted to the pros and cons of using debit cards.
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Watch out for card skimmers. A way that criminals can steal credit card numbers is by using a small electronic device called a skimmer. Be careful whenever someone takes your card out of view, such as in a restaurant or bar. Skimmers can also be placed over the card slot of ATMs, so never swipe your card in any device that looks suspicious or out of place.
Even though the new regulations will strengthen consumer rights when it comes to credit cards, it’s still up to you to take charge and use them responsibly and well within your means.
Administrative
A big thank you to “Charlie On The Pennsylvania Turnpike”, who added Money Girl and several other QDT Network widgets to his blog at whatsit2you.blogspot.com (where “to” is the number two). I’m glad you’re listening.
Chi-Ching, that’s all for now, courtesy of Money Girl, your guide to a richer life.
More Information:
Will the new credit card law hurt more consumers than it helps?
What the new credit card rules mean for you.
Watch the CARD Act signing ceremony