Don't Do Debt.com

Pros and cons of credit card use

A recent comment to this blog asked about the pros and cons of credit card use. Here are a few that come to mind:

PRO: Using credit cards can be used to build credit.
PRO: Credit cards can be used to cover a financial emergency.
PRO: You don’t have to ask for anyone’s permission to spend money or to open a credit card.
PRO: You can do or buy things you can’t ordinarily do or buy, such as traveling, paying for school needs, etc. (I’ve heard of some students who actually pay for their college and/or their books and supplies on credit cards).
PRO: You can earn incentives such as frequent flier miles, something useful for people who frequently travel.
PRO: For those with the “buy now, pay later” mentality, it seems the world is yours when it comes to your first and second credit cards.
PRO: Many people believe (as I once did) that credit cards help conserve your cashflow- meaning that if you charge something to a credit card, you don’t have to use your cash to pay for it.

CONS:

CON: While credit cards can be used to build credit, if they are not used correctly and with regard to your credit report, using credit cards to build credit can quickly backfire and do more harm than good to a credit report. It's important to understand the importance of paying on time, how to demonstrate positive money management, etc. I'd suggest that people should understand credit reports before contemplating credit card use.

Don't forget...Write it down!

Don't forget to take account of all money outstanding (credit/debit purchases, outstanding checks) to determine your balance when balancing your checking account. Take the current balance of your checking account and subtract outstanding debit and credit charges and any checks- that's how much money you have.

Sounds like an elementary reminder, but too often people forget to write down the checks they've written or the credit or debit charges made with a debit card. Even debit transcations can send you into overdraft status, even if your purchase is approved.

Make it a habit, if you haven't done so already, to write all of your purchases down. This is also helpful in the future when it's time to evaluate your spending habits. You can look at how you've spent your money for the past few months and assess ways to cutback and save money.

Incentive happens: A vision and money

The holidays are now officially behind us. Okay, well actually, tonight marks the end of the holiday season for me as I had one more party to attend this evening. I declined at the last minute as I felt compelled to write about some questions asked of me while travelling around during the past few weeks.

One thing I'm frequently asked after the madness of the holidays comes to a screeching halt, is how to have more money. One person recently expressed concern about her inability to save money, another asked about how to have more money to get out of debt. A mother asked me how to teach her sixteen year-old about money as she recently took on her first part-time job. Other questions have come up, too, but here are a few thoughts I had in response to these questions:

I don't have the perfect answser for anyone. But one thing I live by for myself is this: I have a vision for what I want to do with my life and my money. I have things I want to accomplish:

Quick tips and your money

When I tell people that I write about credit cards, debt and money, I am inevitably asked about any "quick tips" I might have. So, I thought I'd take a minute to share these with others who might have this same question. Below are a few of these "quick tips":

1). Have a vision for your money (see blog entry below).
2). Be aware of the cost of being in debt: It is in fact very expensive to be in debt. When you break the costs down, you can see the incentive to begin seriously eliminating, or at least, reducing the balances on your high interest credit cards (see entry/article- "Quicksand: Debt's impact on budgeting").
3). Get organized with your money: Late/missed payments can be very costly to the cost of your debt-load and can seriously erode your credit report. It’s important to be organized with your money in order to avoid these and other unnecessary and costly penalty fees.

Guest article: Budgeting When Your Paycheck Varies

By Terry Rigg

How can you decide how much you have for bills and expenses when your paycheck varies from one payday to the next? That's a question a lot of people struggle with.

A few of the occupations that I can think of off hand that could fall into this category are waitresses or waiters working for salary and tips, truck drivers that are paid by the mile and never know how many miles they are going to get, the self-employed that their business income varies from season to season, and the list could go on.

Trying to manage your finances with a steady income is hard enough but when you never know what your paycheck will be seems almost impossible, but it's not. It is, however, going to be a little more tricky.

Updated info, new resource & more

If you're new to this webBLOG, don't forget to read through the blog entries in archived months. There is lots of information in this blog and just wanted to make sure you know to where to look for answers you may need. The month of October contained numerous blog entries about credit card use, credit report, basic money skills and more. Please be sure to dig around. Ask questions. Post comments.

FYI: Excellent resource to check out: www.HomeMoneyHelp.com. Don't miss it. Offers lots of resources for those in debt, working on budgets, trying to make the most of money and lots more.

Please be sure to tell your friends and family about this webblog and the website, www.DontDoDebt.com.

Thanks!

Article: "Quicksand- Debt’s impact on budgeting"

(Highlights from an article slated to appear in an upcoming edition of Budgetstretcher Newsletter)

Ever find yourself quietly pondering where it is exactly
that your money goes? Or, do you find yourself constantly struggling
to save money and get ahead in spite of perfecting your budget
and cutting back on spending? If you’re struggling with money
and credit cards are a part of your spending strategy, it’s time
to look at how your debt-load could be crippling your efforts to
budget and save.

Think of these simple costs to use a credit card:

Balance	Interest	Cost
$2000	10%	$200/year
$5000	10%	$500/year
$10,000	10%	$1,000/year
$20,000	10%	$2,000/year

Other highlights:

Being in debt can cost thousands of dollars a year.
With the cost of being in debt so high, it’s important to understand how credit cards work.
Many people do not comprehend the impact of interest until they’re swimming in it.
When it comes to your money, don’t overlook how your credit cards could be hindering your efforts to budget and save.

Cost of Credit Cards

Think of these costs for the simple privilege of using a credit card(s) (AKA: The cost of being in debt):

If $1,000 balance at 10% APR, $100/year.
If $2,000 balance at 10% APR, $200/year.
If $5,000 balance at 10% APR, $500/year.
If $20,000 balance at 10% APR, $2,000/year.

Typical interest rates range from 8% to 14.9%, with penalty increases that can send your APR into 23-26% range.

Let's double those costs:

If $1,000 balance at 20% APR, $200/year.
If $2,000 balance at 20% APR, $400/year.
If $5,000 balance at 20% APR, $1000/year.
If $20,000 balance at 20% APR, $4,000/year.

Imagine the cost of multiple credit cards. Pretty pricey food for thought.

Spending Craving Cure: Garage Sales

Streets of Decatur, GA are lined with garage sales galore. Gotta admit, I'm ready to shop and spend some money. Bring some cash and you can have anything you want for less than what you'd pay retail. "Powell," my friends scream with child-like enthusiasm, "You can get a Mexican blanket just like the one you wrapped up in on the way down". (They won't give up the blanket, it officially belongs to the dogs). I address the garage sale topic for this reason: We all need and want (okay, sometimes crave) certain things. Spending money can sometimes be it's own romance- it's seductive and feels good and you get to take something home with you.