Once upon a time, I was a young adult with champagne taste and a PBR wallet who thought credit cards were awesome! Pick a card, any card that made it possible for me to buy whatever I wanted, whenever I wanted. It was amazing until reality struck and the bills started rolling in. Thankfully, I was always employed but when the minimum payments were all I could manage, I knew I had to get serious.
It was too easy to rack up those balances, but it was so hard to eliminate them. Here’s what I did then, and now, whenever I use credit cards. I take the card with the highest interest rate, and pay as much as I can until it hurts, and by hurts, I mean I have nothing left over, zero!
I use Bill Pay to schedule weekly payments of that hurtful amount. I take that amount, multiply it by 52 weeks and divide by 12 to determine my monthly expense (for the budget). I use a loan calculator to determine the “term” or how long it will take to pay off the card. When making large weekly payments, you will be surprised at how quickly you eliminate your balances. You are significantly decreasing the interest you will pay to the creditors, too! Of course, if you have more than one card with a balance, you must continue to make the minimum payments on the others while you tackle the one with the highest interest rate first. Once you do this, then tackle the next highest rate card and the next. It took years to eliminate my own balances back then, but I’ll never forget how good it felt to be debt free!
Building credit is a must. Good credit is the foundation to live the all-American dream. You know, the house with a white picket fence kind of dream. Credit cards are one of the fastest ways to build credit worthiness which requires a disciplined use of the card and repayment history. Plus, it’s just smart to have a card in case of an emergency too. The key is to manage credit cards wisely. In other words, keep your champagne taste in check and don’t dig yourself into a hole that is hard to climb out of!
Today, young adults have more ways than ever to get in over their heads. It’s no longer just credit card debt. Now they can buy now and pay later too! Creditors are making it easy to lose track of spending and I guarantee that those buy now, pay later payments are not making it into any budget! I think they are a great option but here’s a tip: write down the payment amount, due dates and number of payments and set those funds aside.
Credit is a wonderful thing but I think to use it, you must know yourself. How disciplined are you when it comes to spending? If you are like me (hello… champagne taste) then you must be diligent in your repayment strategy. If not, then it can be debilitating, and no one wants that for you.
When credit cards call to you, spend wisely and start paying each purchase off week one. Take your purchase, divide it by four (if paid weekly) and schedule the first payment to go out on the next pay day. It will be paid in full before the bill hits your mailbox! Okay, that might be a tad over the top, but it works for me!
Yours truly,
Jennifer Supranowicz "Banker Mom"