10 Credit Card Tips That Will Save You Money Without the Debt
I have one hell of a relationship when it comes to credit card.
On the one hand, I would not have excellent credit if it weren’t for my signing up for credit cards, so kudos to you, credit cards, for helping me reach my perfect credit score. On the other hand, I have an enormous amount of credit card debt despite this beautiful credit score, so screw your credit.
When paying off debt, one must be strategic to get rid of it once and for all. I have finally found some tips that work to battle my debt and prevent me from accumulating more debt than I already have. Check it out.
1. Pay your card off as soon as you use it
I know this is the oldest tip in the book, but it is a good one. I heard this tip long before I had a credit card. But it is easier said than done. If you spend $50 on your credit card today, you want to pay off that $50 by the end of the month.
Sounds simple. But why is it easier said than done?
Typically, I use my credit card for $50 instead of taking it out of my checking account and making the mistake of looking at it as “free money.” And then eventually, the initial $50 I didn’t pay before it turned into $200, which I now have to pay because of interest.
Of course, I didn’t thoroughly think about the consequences of my actions at the time. But telling myself to pay it off immediately would’ve been nice. Luckily, there is such a tool that does this for you. It’s called Debitize.
What it does is pay off your credit card balances for you every single week. It keeps a certain amount of money in your Debitize account each week, so when you spend money on your credit card, it pays the balance. Something else I love about this tool is that it can be on your credit card weekly, so you can lower interest payments by paying more than once a month. If you want to learn more about Debitize, you can check them out here.
2. Get a sound card with points, cash back, etc.
If you use a credit card, you want to ensure it is good. Now, the hard part is determining which card is good for you. A credit card that gives you frequent flyer miles is probably a good bet if you travel a lot.
If you want cashback or points for your purchase, there are plenty of those around to choose from. If you want cashback or points for your purchase, there are plenty of those around to choose from. You can learn more about using credit card points to your advantage on Easy Financial’s blog. The key is ensuring you are getting something for using your card. Use the free tool from NerdWallet below to determine which credit card works best for you.
I am a big fan of cashback cards since you can use your points to get gift cards for items you buy with your money. Or better yet, earn cash back to add to your savings. Fingers crossed that you get some great options using the tool above.
3. Make more frequent payments
Question for you. Are you aware of how much interest you’re paying daily? Yes, I said daily. Because the truth is that if you carry debt, you pay interest on that card daily. So, what is your per diem interest on your credit card? I like to figure out this number to keep my debt payoff in check. To figure out your daily good, you use the following calculation:
Interest Rate/365 x Principal=Daily Interest
If you have $20,000 on your credit card balance with an interest rate of 11%, you are paying $6.02 per day in interest!
Now, consider what you could buy with $6 a day instead of paying interest. That comes up to $2,200 over a year. There is plenty you could buy with that amount. I like to make more frequent payments (weekly), paying the same amount I would pay over the month. I do this to ensure I spend more than the daily interest to get ahead.
So, for example, let’s say your daily interest is $6 per day, but you realize that with your monthly payment, you are only covering $5 a day in interest. It would not be easy to get ahead. So make sure you make more frequent payments that are higher than what you pay in daily interest.
By the way, Debitize allows you to make multiple monthly payments on your credit card. It’s another excellent feature of this tool.
4. Pay Your bills on time
Yes, this is a basic one. But this has to be one of the essential things you can do to save money regarding your credit. Did you know that if you pay your credit card bill late, it could stay on your record for up to 10 years? That’s a long time to deal with a lower credit score that could result in higher interest rates on everything. So paying your bills on time can be a huge factor in saving money in the long term.
Make it easy for yourself and turn on the auto bill pay on all your accounts just to be safe. Of course, when this happens, you want to ensure money is in your bank account.
5. Invest your cash back
Did you sign up for that cashback card I mentioned in point #2? If you did, this is an excellent opportunity to put that money into an investing account.
I recommend using robo-investors like Stash. Setting up an account and investing in companies you enjoy or believe will do well is easy. They make it easy for you to support as frequently as weekly if you would like to. I want to auto-stash $5 a week in my portfolio. Sign up for Stash using this link to get $5 in your account!
If you are thinking more long-term about your investment plan, another option to consider is Ellevest. While they have various savings accounts you can sign up for, they also have investment accounts that let you save your cash tax-free, baby! But most importantly, they set you up with a free goal-based investment plan just for signing up with a free account.
Investing can be intimidating, but it’s pretty simple when you have the right tools. If you are making extra cash from your credit cards, take that free money and make it grow!
6. Ask to lower your interest rate every six months
This is my favorite way to save money with my credit cards because it works miraculously well.
If it’s been six months since you’ve had your credit card and you have not asked for your interest rate to be lowered, I highly suggest you do. Many credit card companies will drop it for you, no questions asked, as long as you speak up.
You want to make sure you pay your bills on time so they will want to do something nice for you. But I have had more success with this than people telling me no. There have been a few no’s here and there, but for the most part, I get people who say yes.
This is huge because it could significantly affect your interest pay. Sometimes, I’ll call to lower my rates as often as every three months and see what happens. Also, this method works wonders in reducing your regular bills. It’s worth picking up the phone and giving it a try!
7. Stay under 30% of your credit card ratio
Your credit card ratio is the percentage of your credit card that you’re using. For example, you have a credit card of $1,000, and you want to stay within the 30% credit limit ratio. That means you do not want to spend more than $300 on a $1000 credit card. Makes sense?
This credit card ratio plays a significant role in your credit score, so it’s a substantial number to be aware of. One thing to remember is that the credit card ratio if you have includes all of your credit cards, not just one. For example, if you have three credit cards totaling up to a $100,000 credit limit, you should not spend more than 30,000 dollars to stay in range. Keep this in mind before canceling any credit cards!
8. Always check your credit card statements
This was one thing that I initially was not doing. I figured that since I was not using a credit card actively and only paying my debt down on it, I did not need to check my balance.
Then, one day, I did…
I soon realized that there were several charges on my credit card statement that I had not made. And since my card is so diligent about alerting me about unknown purchases, I did not see this as a possibility. But because I happened to check my statement that month, I was able to catch the issue and get it removed.
It is essential to check your credit card statements, regardless of whether you actively use them. It is also an opportunity to make sure you were not overcharged for something or to give you a better idea of how much you spend every month.
9. Turn on Balance Alerts
While checking your balance on your card every month is essential, ensuring you have your balance alert for your credit card is even more critical. This means getting an email or a text notification for any purchase on your credit card. This makes it easy to spot if someone else is using your credit card so you can resolve an issue faster than waiting for the statement to arrive. It is just an easy precaution to ensure your card does not fall into the wrong hands.
10. Don’t close old credit cards
Unfortunately, I took this lesson by making the mistake of closing my most senior credit card recently. This card was ten years old compared to my other cards, which were only a few 6-years old.
Your credit card age plays a significant role in your credit score. And when I canceled my oldest card after paying it off, my credit score went down by 40 POINTS! I freaked out! I could not believe I had made such a massive mistake with my credit.
Getting your credit age back to where it was will take time. But you can also improve your credit score by other factors. For example, ensure the credit utilization rate is under 30% (see point #7). Please don’t make my mistake! Keep your old cards.
These are the tips I’ve learned from various courses, finance books, and working with a Wealth Coach. But I am sure there are so many other credit card hacks. Please leave your best credit card tip you’ve learned in the comments. I want to hear all there is to know about paying off your credit card debt.
Sources
7 Credit Card Tips Everyone Should Know
7 Inventive Ways to Make Money Using Your Credit Card
Using a Credit Card Responsibly
