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Opinion

Credit cards not difficult: Stay out of debt while earning money through rewards

Kirsten Blake

November 12, 2009

There is a lot in the news about consumers getting ripped off by credit card companies. Those companies are irresponsible, but at the same time, so are the consumers. To a certain extent I feel we are the ones who should be held accountable for our own debts instead of blaming the banks, the government and the credit card companies.

What is funny is that families are in a sweat about their debt, when in reality the consumers should be making the credit card companies worry about losing money.  We, the consumers, can be making bank off of the credit card companies by simply avoiding fees and interest charges, then taking the card’s rewards.

In order to do that you have to know at least a little bit about credit cards. From what I’ve seen in the news and heard from my peers I’m convinced many don’t have the slightest idea.

Rule number one to exploiting credit card companies: read the fine print, and if you can’t understand what APR, minimum payment due and available credit mean, then ask somebody or Google it.

Rule number two: Pay the full statement balance every time. This way the credit card company cannot make money off of you by charging interest on that unpaid balance. Interest is where they make their money – your money.

Rule number three: Pay your balance on time. If you do this, the company can’t charge you late fees and it takes away one of their excuses to raise your Annual Percentage Rate. Paying on time is easy. Write it on your calendar, put it as an event in your phone or sign up for automatic payments online.

Sometimes payments aren’t made on time because the money simply isn’t available. If this is the case, I would seriously consider getting rid of the credit card or finding a way to cut expenses.

Now all that’s left to do is spend money and earn rewards. Make regular, day-to-day purchases. Food. Gas. Electric bill. Then pay for them – the whole bill every month. Earn points on things you need to be purchasing anyway and earn rewards. With my credit card I have the opportunity to earn cash back (CASH!!) or Amazon.com gift cards. Other cards give free travel miles, gas cards or nights in a hotel.

The rule that must be followed, above all others, is to never charge more money to a credit card than is in the bank.

If you want to get money from the credit card companies, it is important to understand that a credit card is not money in your pocket. It’s money being borrowed for just a few short days that has to be paid back. Imagine that instead of swiping your credit card, you are writing a check – and if you won’t have the money in your account by the end of the month to pay then you should not be making the purchase.

I will admit that I’m not an economic specialist, so who am I to write this? I’m not a banker or any kind of professional, but I understand that in order to stay out of debt, a person can’t spend money that they don’t have.

I also like to save money and find a good deal. But if I buy a shirt on sale with my credit card, then don’t pay the balance and it gains interest, I end up paying more for that shirt that what it was worth.

I don’t understand how Americans can buy these things, not pay right away then end up owing far more than the original value of those purchases.
The entire reason we are experiencing this economic recession is because America hasn’t been living within its means.

Maybe this isn’t really a recession after all. Maybe it is a reality check and our current spending is closer to where it should be than it was before.

The truth is, no one needs a credit card.  Cash and check work just fine, which is why a lot of people have decided to avoid getting a credit card altogether.  That works too.

Kirsten Blake is an alumna of the University of Wisconsin-River Falls.

Comments

mike on 13 Nov 2009: Great article, good information. I have been championing a concept that I believe is vital for young adults to understand if they want to increase their chances in achieving financial and becoming financially literate, START EARLY. Young adults need to gain the knowledge of the importance of TIME and how compound interest is so critical. We still need to see state education leaders addressing the graduation requirement of a personal finance class, not economics, for all high school students. The key is education, education, education. I champion the cause each and every day working with young adults and as the author of Your Money Day One: How to Start Right and End Rich. It is available for young adults through amazon.com or an MP3 download on audible.com or iTunes. Please feel free to visit my website, http://www.michaeljwagner.net or blog http://michaeljwagner.blogspot.com.

An American on 12 Nov 2009: The sad truth is that Americans have not been properly raised. There; I said it. No one wants to admit the dirty little secret that the generation previous to the current parents are loathe to realize. We were sold on the idea that credit was easy to get and not enough parents really sat their kids down (even as adults) and warned them that credit is a tool, not a game of dating up ("who will pay my credit card bill for me?") or slick investing. As Americans, the values earned by the "greatest generation" were handed to the next few gen's with no price tag. This became a sense of entitlement that scorned Europe even as we led the way (for a time) in technology and gagetry. It is time for a serious wake-up call for all Americans that credit is not free, and sometimes mommy and daddy can't buy you every toy you want, simply because you scream loud--and that you can't expect a boyfriend to buy your way out of debt, or that (as a man) you are smarter than your boss, the banks, and the rest of the world--and therefore you can scam your way into wealth. Sadly, this is a simple case of not paying attention. It's Bernie Madhoff and his investors over a longer period of time. "As long as *I* am making money who cares about the other guy" syndrome cannot stand the test of time. We (as Americans) have to get OFF of our instant gratification addiction and stop buying into the hype that we need everything we see on TV, and we need it NOW, and we need it from Walmart. until then, expect more financial stupidity, and people who will profit from it.