Tuesday, February 9, 2016

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"Clueless" How To- I Went From Having Multiple Credit Cards To One

There was a time in my "clueless" life when I didn't have a care in the world about my finances. I wasn't a huge spender but I wasn't living within my means either. The holiday season is behind us and I'm not in the "how am I going to pay these off" mode. When my statement hits my inbox I'm not stressing because I stayed within my budget. I have huge smile on my face because my balancing game is adding up.

This certainly was not the case back in the day when I had several store cards on top of the 1, 2, 3... credit cards I already had. I also remember having 2 of the same credit cards (different account #'s) from the same company and not knowing the difference between the two. I think one had a higher credit limit than the other. This was when I thought credit cards was free money but in reality it was my money. It wasn't until I had a financial scare I was like… Girl, You betta!!!

I blogged about it on My Journey To A Minimalist Lifestyle. I guess you can say I was a minimalist before I even knew what it was. It was then that I SAT my ass down somewhere and "try" to understand how credit cards work. Here's what I came up with. Yuck!!! I hate ADULTING. Who came up with this ish?

APR (Annual Percentage Rate)- The interest rate >YOU< the card holder will be charged if >YOU< don't pay the FULL amount owed before the due date.

I used to pay the minimum and thought I was doing myself a favor but I was helping the credit card company make mo' money off my "financial knowledge". I'm no math whiz but my previous purchases ended up costing me more because I was paying the minimum. Now the card company doesn't understand my "Im'ma pay this in full" attitude.

Credit Card Rewards/Cash Back- I have a love-hate relationship with them. A lot of them are marketing ploys just to get you to spend more than you can afford. Some of them are worth having if you are a card holder that pays off your balance in full and on time.

With reward cards you automatically earn rewards for everyday purchases. Some will offer 5% cash back but up to a certain amount during a certain time period.

Try to find a card that is in line with your spending habits. For example if you're a frequent traveler get a credit card that reward you points for travel. If you want to save on gas find a card that rewards you for that. It will be much easier to stick with a card that rewards you for your spending habits than one you really have no interest in.

Always, always read the fine print because some of these cards have fees. Now think about it… is the fee more than the reward that your'e getting? If so, then it's not worth spending more just to get less than what you expect.

It really irks my nerves when I get an offer to spend an astronomical amount just to get a "reward" that really isn't worth it. I can just go out and get it myself without having to spend that much. These card companies, boy I tell ya…. their main goal is to make $$$

Cash Advance- A service provided by most credit card companies that allow the cardholder to withdraw money from an ATM or bank counter. This interest charge is normally higher than other credit card transactions.

I never withdrew money from the ATM or counter service, but I do remember checks being sent and I thought I could avoid those charges. Ha! They got me because it works the same way.

Balance Transfer- Pay off the balance on an existing credit card by transferring it to a new credit card (usually there is a fee to do so) to pay down the debt faster.

I was constantly getting offers to apply for this and I'm glad I didn't. I remember a former co-worker's hilarious tale of her maxing out her credit card, using the new card to pay for the old one, and REPEAT. It was like a game to her and a never ending cycle. It's one of the reasons I never bothered taking advantage of those offers.

My reaction to her maxing out stories then me realizing it was a game I didn't want to play. I just knew I wasn't going to win. 

However, I did win by learning how to manage my card. I slowly started getting rid of those unnecessary cards until I narrowed it down to just one. Credit cards are worth having if managed properly. For me, it became more about saving, budgeting, and having a QUALITY vs QUANTITY mentality when using my card.

There's more terminology but my I.Q. is begging me stop. It's so confusing sometimes. So having the basic knowledge of how credit cards work, I quickly started making changes. I stopped being the queen of buying a lot of cheap stuff to getting an understanding that buying quality is going to end the cycle of buying the same things over and over and over again.

A perfect example of QUALITY vs QUANTITY was when I found myself replacing my home computer almost every year. It seemed like as soon as it hit the one year mark, it don't want to "ack" right. I went from Gateway (remember them?) to Dell to not having a computer for awhile. I was getting access at the library then finally getting a MacBook Pro in 2013.

Aside from the normal "wear and tear" I haven't had any major problems. There was one time the airport went out and luckily I had the care plan and it was back to normal again. Now watch how it starts to misbehave with all the praise I'm giving it. Anyways, where was I? Ok….

I used my card to make the purchase and when the bill came I paid it off in full. I was so impressed with my purchase that I followed up a year later and bought an iPhone. I really needed a new phone because the smartphone I had fried. I couldn't afford to get a new one right away so I using a backup phone. Once I had enough money saved up, I was ready to make my purchase.

Everyone has their "thing" and this is mines. 

I'm old school and I'm still using pen and paper. I give myself a budget and once I reach that amount on my card, I start using cash. I save the receipts in a manilla envelope just in case I have to return something. Each time I make a purchase (I try to gather all the receipts at the same time), I add them up, write that amount down on a sticky (yes I use the front and back of it), and repeat till I reach my budgeted amount.

I won't use my card again until a new cycle opens up. There are times when I go a little over budget and it's usually around the holidays/special occasions. For the most part I stick to it and these steps has helped me to keep track and stay within my budget. It has also helped me with my credit score. I recently checked on it and it shows that I'm a very dependable borrower. 

I just have a bone to pick with how the scores are recorded. It's confusing to me how I'm in the very dependable bracket but the score goes up and down a few points. One month I'm up a few points then next month it goes down a few points. I'm still in the same bracket but it's just weird how I didn't do anything different from the last time and it changes. Anyways, I need to find something else to be complaining about. 

How many credit cards do you have?


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