Jace FerraezThe average consumer knows that credit cards do have advantages, e.g., better response to fraud issues, ease of renting cars and hotel rooms, cash back and travel bonuses. The problem? Many consumers use them to spend more than they can afford. As simple as that notion may seem, CNN Money released an article suggesting that the problem of overspending could be avoided if consumers had a “good introduction” to credit card use. Specifically, the article suggests avoiding three rather large mistakes when selecting a card: (1) Avoid paying credit card late fees; (2) Avoid unnecessary interest; and (3) Get something for your spending. Let’s break these down individually.

Avoid Credit Card Fees

Managing your finances starts with making sure you are on time with any credit card payments. Credit card companies will often let you adjust your due date so that bills are due when it is convenient for the consumer. Take advantage of that flexibility. And while we all let deadlines slip up on us, paying a credit card late fee is a big mistake for two reasons according to the article. First, a late fee signals that you missed your deadline. Second, if you paid the late fee, you may not have attempted to get the fee waived. Credit card companies will sometimes waive the fee if you call customer service. The practical implication of paying credit card late fees is that they eventually add up to less money in your pocket and more in the credit card company’s pocket.

Avoid Credit Card Interest

Interest may not seem like a big deal to the average consumer until they see it broken down numerically. According to the article, a high interest rate on even a $1,000 debt over the course of ten years turns into a rather large number. For example, if your interest rate is in the high 20’s, a $1,000 debt over ten years turns into $12,000. Even carrying a $2,000 balance at an 18% rate costs you a loss of $360 per year. The takeaway: if you consistently carry a balance on your card, you probably should not be using the cards.

Get Credit Card Rewards     

There are a lot of options out there when selecting credit cards, and the article suggests that you may want to choose the ones that best reward you for your spending. If you have a family and get rewards for the things you spend money on every day (gas, groceries, etc.) your rewards could build up over a year. Still, be on the lookout for high interest rate cards, as that fact alone could outweigh the benefits you get from any reward program.

While this advice may seem like common sense, many people struggle to manage their finances due to unexpected emergencies, unforeseen costs, and everything else in between. If you find yourself in that position, our attorneys can help. Call one of our offices near you to set up a free consultation and speak with one of our attorneys.

 

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