The Wonderful Invention of Credit Cards and How To Manage Them

Written by A Guest Speaker on May 21st, 2008

The Wonderful Invention of Credit Cards and How To Manage Them
Written by Jarret Cade

Ah, credit cards, what a wonderful little invention right? A credit card can be both a good thing and a bad thing. However, more often then not they turn into a bad thing. Why? Because a credit card allows you to spend money you don’t have. This is where most people get in over their heads instead of coming up with a plan and sticking to it.

Some studies report that in 2007, credit card debt that was past due 30 days or more totaled over $17.6 billion. Other studies show that close to 5.3 billion credit card offers were mailed out to U.S. households. No wonder why there are so many people in debt, the credit card companies just keep feeding the nation.

So, how exactly do you avoid credit card debt you ask? Well the obvious answer would be to never get a credit card. No credit card debt, no using money that is not yours, meaning you have nobody that you have to pay each and every month. But in today’s world, you almost certainly need a credit card. Credit is a big factor when it comes to renting an apartment, buying a house, and getting any type of loan. Considering that most people do one of those things in their lifetime, not having a credit card is really not an option.

Like almost every other person over the age of 18 in the U.S., I have a credit card. It is only at a small limit as I have not had it very long but that is ok since I don’t really buy a lot of stuff as it is. A few things here and there, but nothing that I cannot afford. Notice the last part of that sentence, “but nothing that I cannot afford.”. This is probably the best advice that I can give to steering clear of credit card debt. I have a pretty simple philosophy, if I cannot afford it I do not deserve it.

Honestly I would rather have something that I know that I own, then to have something that I technically do not own because I am paying somebody else for it. Yeah I may miss out on some things that I really want and I may not have a much fun as the person next to me. But I can be guaranteed that I do not owe anybody any money. And when you know that you do not owe anybody any money, you have a lot less to worry about.

If you are one of those people that just has to have something, set a limit on how much you spend each month. Only allow yourself to charge a certain amount to your credit card and stick with it. Because I can almost guarantee that once you go over that limit, you will continue to keep doing so. Just because your card gives you a credit line of $1500, does not mean that you have to go out every month and buy $1500 worth of items just because you can. Mind you, you are still spending money that is not yours and you will have to pay that money back eventually, but if you have the discipline to set a limit you probably have the discipline to make the monthly payments as well.

Like me, you have probably gotten more then a few credit card companies offering you all kinds of deals. And as good as some of those deals sound, you should really find one that suits you the best and stick to one card. You do not have to accept the first offer that you receive, take some time and check out the companies online and see what they offer. Some companies offer special rewards such as cash back on purchases made at the store. As well as some companies giving you points each time you make a purchase which in turn you can use to travel with. Having one card will obviously limit how much you can spend, but once you start using the card and make payments, you should start seeing your limit increase.

Ah, the monthly payment. This is how most people end up in debt and remain in debt. Because the companies only ask for so little, with interest and all the other fees, sometimes you are not even actually paying off the company. In reality you are paying the fees and interest while each and every month, more and more interest is applied. The monthly payment is usually extremely low and that is what attracts people so much. You can go out, spend a couple hundred dollars and when it comes time to start paying back that money, you only have to pay $15 each month. And that is what most people do, make the minimum monthly payment. Eventually you will be able to pay off the debt using this method, but it will not be quick and like I mentioned before, you could just be paying interest and fees instead of the actual debt. So make an effort to pay more then the minimum, in all honesty pay as much as you can afford because the sooner you pay off the debt, the sooner you do not have to worry about it.

Along with paying more then just the monthly minimum, you need to make these payments on time. Credit card companies will add a fee to your account each and every single time that your payment is late. Add this along with the monthly interest on your account, and it is a sure fire way to place yourself in a situation that can only get worse. These fees can be small and they can be large, in any event, it is extra money that you have to pay.

So how exactly do you go about getting out of credit card debt?

Like I stated in one of my previous paragraphs, make the monthly payments. Make more then just the minimum payment and even more importantly, make them on time. The possible fees that the companies may add onto your account when you do not make a payment will put you even deeper in debt. But I can barely afford to make the miminum as it is, what do I do? Simple, give up a few luxury items. Instead of spending $6 on a mocha at your favorite coffee shop, spend $1 on a bottle of water. Yes I know, it doesnt taste as good, but look on the bright side, you are saving $5 and the water is a lot healther for you. Take that $5 that you saved and put it towards your monthly credit card payment.

Eat out less often as well. It costs a lot more money to go out to a restaurant then it does to stay at home and cook. And like with the bottled water, chances are the meal will be healthier. Unless of course you are eating anything deep fried, but that is another issue. I know these things may be hard to do, but you are going to have to make some sacrifices to get yourself out of debt.

Hey, I just got this letter in the mail from Company XYZ telling me that they can lower my monthly payment and save me money! No, not really. This companies are out to make your already bad situation even worse. Sure, they may reduce your monthly payments but in the long run you aren’t saving any money. You are actually going to be spending more considering that Company XYZ wants to make some money as well, they are for sure going to figure out a way to get you to pay. So on top of you already owing your credit card company money you will also owe Company XYZ money, not a very good thing if you are trying to get out of debt. A great way to get even further into debt though….

Stick to the credit card(s) that you have and do not accept any more offers. You may end up finding that even your own credit card company is willing to give you another card to pay off your current debt with them. There are rare occasions where it may be a better option to move all your cards onto one card, but these situations are far and few. Another card means more interest, more fees and more debt.

So, lets review.

How to avoid credit card debt altogether:

Do not get a credit card in the first place
Do not spend more then you actually have in your account
Make a full payment as soon as you get the statement
Make the monthly payment and make sure it is on time
Stick to one credit card
Set a limit and stick to it

How to get out of credit card debt:

Make more then just the minimum payment
Make the payment on time, do not wait until the actual due date
Sacrifice some luxuries to make more then just the minimum payment, in the end it will be worth it
Do not accept more credit card offers
Do not accept offers from companies claiming that they can reduce your monthly payment and save you money