| We all know the key to good health begins with a | | | | you need to charge, experts say at least pay |
| dose of prevention--eat right, exercise regularly, | | | | more than the required minimum payment. |
| and get a good night's sleep. Your financial health | | | | Pay on Time |
| is no different. By taking a few steps of | | | | Michael Killian, credit and debt management guide |
| prevention today, tomorrow your finances will | | | | for About.com, says never make a late payment |
| have a clean bill of health freeing you to live a life | | | | to anyone including car and house payments. |
| of opportunity rather than of difficulty. | | | | Because of the universal default clause in credit |
| Keep the Right Perspective | | | | cards' terms and conditions, credit card companies |
| Much of the problem with credit card debt | | | | can raise your interest rate if you are late paying |
| problems comes from changes in credit card | | | | any creditor or even your utility company. Read |
| availability, advertising, and values over the past | | | | our Universal Default article for more information. |
| 75 years. According to Linda Tucker, Director of | | | | In fact, Killian recommends being very early if at |
| Education for Consumer Credit Counseling Service | | | | all possible to account for mail time and processing |
| in North Little Rock, Arkansas, it wasn't until the | | | | by the credit card company. If you're payment |
| 1960s that credit cards started becoming available | | | | arrives before the actual due date you will end up |
| to the average consumer. Now today, nearly | | | | saving money on interest because any interest |
| everyone has access to a credit card. | | | | you pay is calculated based on the average daily |
| Advertising plays a role too. Howard Dvorkin, | | | | balance; so if your payment can bring down that |
| author of Credit Hell: How to Dig out of Debt and | | | | average you will pay less interest. |
| founder of Consolidated Credit Counseling | | | | Some people have turned to online bill paying to |
| Services, an organization that provides education | | | | avoid potential problems with the mail. While Killian |
| on debt and a debt management program, says | | | | doesn't recommend this form of payment |
| that according to one survey consumers are | | | | because of the increased risk for fraud by |
| exposed to 300-400 advertisements every day. | | | | hackers--especially if the company is not reputable |
| Combine this with a shift from saving for the | | | | or doesn't offer encryption--it is definitely a better |
| future and we have a society trying to keep up | | | | option to a late payment. |
| with the Jones' satisfying the desire of the | | | | Use it Like Cash, Not a Credit Card |
| moment. Add the purchasing power that comes | | | | In one sense, you need to use your credit card |
| with a credit card and you have the perfect | | | | like cash by paying your balance in full each |
| formula for disaster. | | | | month. But remember it's really not cash. Imagine |
| But it doesn't have to be this way. If there's one | | | | the feel of that sleek, plastic card in your hand. |
| thing Dvorkin wants consumers to know, it's that | | | | It's so sleek that it slides right out of your wallet |
| you don't have to be a slave to the credit card | | | | with little effort at the check out counter. Each |
| company or even to the seduction of advertising. | | | | time you pull it out it looks and feels the same. |
| You can have control over your financial health | | | | You cannot physically feel your charges climbing |
| without depending on a credit card! | | | | higher and higher. |
| Manage your finances | | | | Now imagine a wad of twenties. The first time |
| Starting with a strategy will help keep you on | | | | you pull it out its thickness fills your hand...you feel |
| track before you ever even pull out the credit | | | | rich (well, at least you feel like you can afford the |
| card. According to Tucker the first step is | | | | purchase your making). :0) But with each purchase |
| determining your monthly income and needed | | | | the wad gets a little smaller until eventually it's |
| expenses. As part of these monthly expenses, | | | | gone...and now you know you can't afford any |
| figure in 5-10% of your income to set aside for | | | | more purchases. Dvorkin calls this the green |
| emergencies, long range savings such as a | | | | factor--with cash you can physically feel how |
| retirement account, and short term savings. If | | | | much or how little you have. |
| you have some savings then you avoid having to | | | | The point is that you need to be in control of |
| put large amounts of debt on a credit card in | | | | your credit card and spending habits. It's much |
| times of a crisis. | | | | easier to be swept away if you use a credit card |
| Setting up a budget is not always easy, so if you | | | | for all your purchases. |
| want some help Consolidated Credit Counseling | | | | Limit the Plastic in Your Wallet |
| Services offers free budget counseling. You can | | | | Every credit card comes with its own set of |
| also consult your phone book to see if your | | | | terms and conditions including varying interest |
| community has a local office of Consumer Credit | | | | rates, penalties, fees, grace periods and due |
| Counseling Service. | | | | dates. It is much easier to make payments on |
| Setting up a budget is just the first step; sticking | | | | time, remember which card has the lowest rate, |
| to it is the next, and often more difficult task. To | | | | and save you from making a mistake that will |
| help keep you on track set goals and put | | | | affect your credit history if you only have to |
| motivators in place. Tucker suggests setting a | | | | keep track of one or two cards. |
| savings goal with a deadline. Savings goals can | | | | Avoid Extra Expenses |
| include emergencies, vacations, cars, and of | | | | Sometimes it's the little extra expenses that |
| course don't forget long range goals such as | | | | sneak up on you before you even know it. |
| retirement. Tucker also says a reward program | | | | Cash Advances |
| can be a great motivator as well. Just keep in | | | | Typically cash advances come with a much higher |
| mind that whatever you choose as a reward, it | | | | interest rate, fees, and no grace period. The |
| shouldn't compromise the hard work you've done | | | | moment you take a cash advance you start |
| in managing your finances. | | | | paying interest on that balance, which means |
| Finally, you need to monitor how much you | | | | even if you pay the entire balance in full each |
| charge on your card in relation to your credit limit. | | | | month you still pay interest. |
| You should never charge more than 30-50% of | | | | In addition, credit card companies apply payments |
| your available limit otherwise your credit score | | | | to the balances with the lowest interest rate first. |
| could go down. For more information on credit | | | | So your $200 cash advance will continue earning |
| scores read our article On the Path to a High | | | | 20% interest until your $2000 purchase balance is |
| Credit Score. | | | | completely paid off. |
| Shop for the Right Card | | | | Extra Products |
| Dvorkin says it's important to really shop around | | | | Credit card companies will try to get you to |
| and get a credit card personalized for your | | | | purchase additional products such as fraud |
| particular situation. Ideally he suggests getting one | | | | protection and insurance. The truth of the matter |
| with no or very low fees and low interest. It will | | | | is you usually don't need it. By law you are liable |
| take a little time to compare various offers, but | | | | for a maximum of $50 if the victim of fraud, and |
| with the high saturation of the market you'll find | | | | in most instances you are not liable for any |
| the perfect fit for your wallet. Browse the Card | | | | amount. If you are thinking about adding on |
| Reports section of to shop for every kind of | | | | insurance, first read our article Credit Card |
| credit card including reward, low-rate, business, | | | | Protection Insurance--Should You Get It? |
| and cards for those with poor or no credit. | | | | Early Education |
| Read the Fine Print | | | | The best method for prevention is teaching our |
| An afternoon reading the fine print probably | | | | youngest generation all about money before they |
| doesn't sound very appealing, but that one hour | | | | even qualify for a credit card. Statistics show that |
| spent reading can save you hours of headaches | | | | students are entering college without ever having |
| and hundreds of dollars in the long run. You'll | | | | a personal finance class or knowing how to |
| understand everything from your interest rate | | | | balance a checkbook. Yet once students arrive on |
| and fees to how to earn rewards and how long | | | | campus credit card issuers are eager to sign |
| of a grace period you have. | | | | them up. College students are racking up the bills. |
| Know Your Interest Rate | | | | Some even drop out of college to find a job so |
| If you're going to use a credit card, regardless if | | | | they can pay their credit card bills. And those who |
| you pay the balance in full each month, you need | | | | do graduate typically enter adulthood with |
| to know the interest rate. This means not only | | | | thousands of dollars in credit card debt and |
| knowing what interest rate you were offered, but | | | | student loans. |
| also the interest rate the issuer actually gives you | | | | In addition, advertisers market more to younger |
| on approval. In addition, check the rate on your | | | | and younger children, so it's imperative to teach |
| monthly statements because credit card issuers | | | | them very early about the lure of money and |
| can raise your rates for little or no apparent | | | | how to manage finances. The earlier children learn |
| reason and with little warning. | | | | how to manage finances the less likely they will |
| Even those who don't carry a balance need to | | | | be to fall into credit card and debt problems as an |
| know their interest rate because emergencies do | | | | adult. |
| happen. Unfortunately, cars break down, jobs are | | | | Fortunately many wonderful resources exist for |
| lost, deaths happen, and marriages end. While it's | | | | parents and educators. If you have elementary |
| always a good idea to have an emergency fund, | | | | aged children check out The "It's a Habit!" |
| sometimes the job search takes longer than | | | | Company and introduce your children to Sammy |
| expected or the second car breaks down too | | | | the Rabbit who will teach them all about the |
| leaving you with no other choice but to put some | | | | importance of saving and developing good money |
| expenses on the card. If you're not up to date on | | | | habits. The Jump$tart Coalition for Personal |
| your interest rate, you might end up paying more | | | | Financial Literacy is another organization dedicated |
| in interest than you have to. | | | | to providing resources for teaching children from |
| Pay the Balance in Full | | | | Kindergarten on up through college valuable |
| This is important in keeping control of your credit | | | | lessons in personal finance. |
| cards. Before using a credit card for a purchase, | | | | So there you have it. Some simple steps you can |
| ask yourself, "Do I have the funds to pay for | | | | start taking today to avoid the trap of credit card |
| this?" In cases of emergencies where your | | | | debt and to help others do the same! |
| emergency fund won't cover the whole amount | | | | |