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Tips for Reducing Your Credit Card Bill Now

Anyone struggling with debt or trying to rebuild after a bankruptcy filing probably knows how challenging credit card bills can be: though the plastic rectangles themselves may be highly convenient, the monthly payments we make on them often are not.

And, with the economy tighter than the lid on a pickle jar, posts like this one are useful. It outlines some ways to minimize the amount you owe on your credit card without significantly altering your lifestyle (which, for many of us, may be impossible at this juncture).

Steps Toward Less Credit Card Debt

• Pay earlier than you have to: If you have a revolving balance on your credit card (meaning that you don’t pay the full amount you owe each month), interest is charged to that amount every day, so that the longer you wait to pay your bill, the more interest accrues. If you can pay even a few days before the due date, you can save yourself a little bit each month. And, if you know you have a revolving balance and have online payments set up, you don’t have to wait until you receive a bill to make a payment—if you get unexpected cash in the middle of the month, you can funnel it toward your credit card debt before it disappears into groceries.
• Pay more than you have to: The Credit CARD Act requires credit card bills to indicate how long it will take you to pay off your entire debt by making only minimum payments, which is a nice feature. It reminds us that the minimum payment is not designed to ease our monthly burdens—it’s designed to make money for the credit card companies and stretch our payments out over a long period, over which we’ll pay plenty of interest. Whenever possible, send more than the minimum payment. Ideally, aim for paying your card in full each month.
• Double check your bill: Next time you receive a bill, review all your purchases, especially regular monthly subscriptions and memberships. If you could conceivably do without any of them, cancel and save some money each month. Remember that most libraries carry lots of magazines and a lot of content is available online. Plus, memberships are designed to make companies a profit—so if you aren’t absolutely dependent on yours, snip them out.
• Leave home without it: While it’s easy to justify carrying a credit card in case an “emergency” happens, having the card with you at all times can be dangerous financially. Try keeping it at home for a week and noting how different your buying habits are. If nothing else, this exercise should open your eyes to when and how you tend to use your card—and how you could limit or eliminate unnecessary purchases.
• Rethink outings with groups: Eating out can get expensive—especially if you frequently put the group’s meal on your card and everyone gives you cash. It’s far too easy to use that cash for something other than paying your credit card bill, and meanwhile you could be paying interest for everyone’s dinner. Suggest a night in every once in a while, or arm yourself with cash.

Have other tips for cutting down credit card debt? Leave them in the comments!

Posted in Credit After Bankruptcy, Financial Literacy, Life After Bankruptcy, credit card bankruptcy | Comments Off

A Time for Credit Cards?

For most Americans, the allure of credit cards can lead to a financial trap. Credit cards make purchasing easier—but can make responsibility harder.

Credit card spending often brings freedom today while impacting your future. Whenever you buy with credit, you're promising your future income today. And if you're buying things that don't increase in value, that can be a poor investment.

If you're considering filing bankruptcy, using a credit card may be twice as bad—bankruptcy laws may prevent you from discharging recently racked-up credit card bills.

However, for those who have learned to use credit wisely, the purchasing power of credit cards can bring peace of mind, and even some added perks, while building credit.

Benefits of Purchasing with Credit

• Protect your money: Identity theft and credit card fraud can be a huge financial set-back. Luckily, most credit card issuers consider users liable for no more than $50 of purchases that turn out to be fraudulent. This protection is generally not available with debit cards, probably because credit cards involve a loan of the company’s money, and debit cards involve only the user’s money.
• Guarantee your gadgets: A lot of credit card issuers provide warranties for items purchased on credit—another reason that many store-offered warranty packages are a bad investment.
• Protect your purchases: A significant number of credit cards include clauses that offer refunds for items that are lost, stolen or damaged recently after being purchased on credit.
• Get reimbursements: Some cards offer users reimbursements if they find a price lower than what they paid for an item; others offer refunds even if they’re against store policy.
• Milk the rewards: Cash-back bonuses, airline miles and other bonuses can be extremely rewarding, as long as you pay off your balance in a reasonable amount of time.
• Travel smarter: Some cards provide insurance for car rentals, air travel, cancellations and accidents, which can cost lots of cash to buy during every trip.

The Golden Rules

Before whipping out your wallet and charging up a storm, though, keep in mind the two most important ingredients in making sure your credit card use doesn’t turn into a recipe for disaster:

• Know the cost. Don’t assume your card offers any of these benefits—read the details of your contract and ask an attorney, trusted friend, or call the company to clarify any muddling points BEFORE using any credit cards.
• Check your budget. Running up a high balance is never a good idea if you cannot pay it off. Remember that credit cards do not offer additional income; they merely offer an alternative way of purchasing with your existing finances.

Additional Resources

The Credit Card Model (PDF): A 1997 study of the debt cycle caused by credit cards and their long-term impact.

Posted in Credit Card Debt, Credit Cards, Credit and Bankruptcy, credit card bankruptcy | Comments Off