Important:
Do NOT cut up your credit cards as many consumer advocates
tell you to do. It is NOT the credit card that is the problem;
it is the user.
All of us need credit
cards to function in a society moving faster and faster
toward CASHLESS. Moreso, you need credit cards to build
a diversified credit history. I think it's flat out stupid
and irresponsible for some of these well-known consumer
advocates to advocate cutting up your cards.
Reminds me of that old
saying, "Cut off your head to spite your face."
...not very wise.
Simple Secret
Puts
Money In Your Pocket & Explodes
Your Credit Scores...Easily!
You can (and should) get at least
two credit cards, even with bad credit. You will pay fees
for the privilege of this credit.
But that's okay. You are using these
secured cards to rebuild your credit. The fees you pay are
the price of rebuilding your credit.
It's not the fees that destroy many
people. Many people do not use credit cards responsibly.
For many other people, they must use credit cards to pay
medical, college or some other bills that must get paid.
These "catastropic" bills
paid for by credit cards overwhelm them, causing serious
pain & suffering.
Secret #ONE: Do not just
pay the minimum monthly payment. This is exactly what the
banks want you to pay, so they can profit off your OVERPAYING.
Please look below at the chart showing
three different people, each carrying a $10,000 balance
on a credit card. Each credit card has a different interest
rate, i.e. 15%, 9% & 24%.It's not the interest rate
that is the problem; it's the unpaid
balance that is the problem.
By paying only the minimum each month
on a $10,000 balance, Barbie will throw $19,784.47
down the toilet in interest alone due to minimum payments!
NOTE:
Credit Card Issuers only want you to pay the minimum monthly
payment, i.e. ~2.5%. These banks set minimum payments to
an amount that includes all finance charges (interest and
fees) plus at least 1% of the outstanding principal. The
payment above reflects the average monthly payment.
Below, you will see the "amortization
chart" for the $10,000 card balance @ 24%. Yikes! It
will take 38 years to satisfy a $10k debt! That $10k turns
into $29,784.47. Double yikes!
Check this out. The monthly payment goes down
each month until the debt (principal + interest) is satisfied:
Source:
http://www.webcalcsolutions.com/Credit-Card-Calculators
It's Not
The Credit Cards;
It's The People (MIS)Using
Credit Cards That Creates The Problem!
Tip
#TWO: If you do not carry a balance
on your credit card, you will not need tip #2. Reality,
50% of cardholders carry a balance...and a high balance
at that. The average cardholder carries a 52% debt2credit
balance. Maintain a D2C ratio as LOW possible;
the D2C utilization accounts for a whopping 30% of your
credit scores!
This is the power of "debt-to-credit
utilization." On average, people walk around with
SEVEN (7) credit cards. These same "average"
people carry a whopping 52% credit-to-debt ratio. In other
words, on each card with a $1,000 credit limit
(or 7 cards x $1,000 /card = $7,000 total credit limit),
these average people carry a $520.00 per card balance
or 52% credit utilization.
So, what this means is that these
average people get hammered each month in interest! Seven
(7) cards x $520.00 = 3,640.00 average monthly balance.
Paying just the minimum each month is...well, it's just
plain careless.
What's the big deal? The big deal
is that credit utilization accounts for 30% of your FICO.
The more debt you carry, the harder your FICO gets pounded.
What's is a 'good' credit utilization?
Action Item: Keep your
Debt-to-Credit ratio as low as possible.
Tip
#THREE: Avoid filling out every credit
application offered to you. Every 3-5 credit
pulls slam your FICO for 12-36 points!
Those irresistible department store
offers for $10.00 off your purchase or 20% discount are
so enticing. Home Depot offers 10% up to $250.00 off your
store purchase with their Home Depot card. It's just a
short application that will take just a couple minutes
to complete.
In the meantime, these applications
when randomly filled out are nothing but "FICO assassins."
They're stealing points from your credit scores. Can your
FICO afford all those 'hard' inquiries? Is that department
store card offer worth the penalty?
Unexpected emergencies occur...that's life. Before you
throw charges onto your credit cards or apply for a new
credit card, please consider the consequence.
If you're able to treat every charge as paying with cash,
you will avoid charging more each month than you can afford...100%
paid-in-full statement each month. You see, I don't care
what the interest rate is on my cards. I pay in full each
month.
Barbie should not throw $19,784.47
down the toilet in interest alone due to minimum payments!
And neither should you!
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