Everyday Cheapskate: Conquering Credit Cards

Creators Syndicate | 5/27/2014, 8:36 a.m.
Credit cards can protect you and your money. But it's so easy to get burned! Are you feeling more controlled ...
Mary Hunt

BY MARY HUNT

Credit cards can protect you and your money. But it's so easy to get burned! Are you feeling more controlled by your credit cards than in control? You have legal rights that protect you, but loopholes give credit card companies an advantage. Consumer confusion can mean big profits for them. Here's the insider info you need to take charge once and for all.

Freebies may not add up. Many credit cards offer enticements such as frequent-flier mileage, cash rebates and purchase discounts, but may charge higher interest rates and big annual fees.

Insider tip: If you don't pay your balance in full every month, chances are the heavy interest plus the annual fee will be greater than the value of any freebies you'll get. You lose your grace period, so every new purchase begins accruing interest the minute you walk out the store. You may be better off switching to a no-fee, low-interest rate card while you are paying off that balance.

The good side of saying, "Charge it!" You get built-in protection with every purchase made with a credit card. When you pay for something with cash, check or debit card, you do not have the protection granted by the Federal Credit Billing Act. This can be bad news if the seller does not deliver goods or services as agreed.

Insider tip: Always use a credit card to pay for something you order by mail, phone or online, or when you put down a deposit on an item. This way, if the company fails to deliver goods or services as agreed, you have the law on your side. Your credit card company must research the problem and make good on your purchase.

How to get out of debt. When used intelligently, a credit card can simplify and protect your financial life. The best way to get that protection and convenience while avoiding the danger of getting burned is to pay the balance every month. If you need help paying off those credit cards fast, try this advice:

Stop using the cards. Don't take on any new debt!

Arrange your debts on a simple chart with the smallest balance at the top, the rest in order below.

"Fix" your payments. Whatever your monthly payment is now, make a commitment to pay that same amount (or more) every month. Ignore the "falling" payment schedule the card companies prefer.

As one debt reaches a zero balance, take its payment and add it to the payment of the next debt in line to help pay it off very quickly. When the second debt reaches a zero balance, take its payment and add it to the payment of the next debt in line to help pay it off very quickly. When the second debt is paid, add the first and second to the third and so on until all are paid.

Insider tip: Take a look at the demo of my Rapid Debt-Repayment Plan Calculator at Debtproofliving.com to see how DPL members are using it to create their own customized get-out-of-debt plans.

Mary Hunt is the founder of www.DebtProofLiving.com, a personal finance member website. You can email her at mary@everydaycheapskate.com, or write to Everyday Cheapskate, P.O. Box 2099, Cypress, CA 90630. To find out more about Mary Hunt and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.