My Credit Cards

This announcement is a bit premature, but not everything that’s premature has to end in an evening of disappointment.

At the beginning of the year, I transferred the balance of my last credit card onto two different cards, each with a 0% interest rate.   One card got a $4,000 transfer and the other got $13,850.  The approximately $415 in fees I paid for the transfer saved me nearly $1500 in interest this year.

The card that got the big balance is the card we use for a lot of our daily spending.    On my statement dated 2/18/2012, the balance on the this card was $14,865.23.  At the same time, the smaller card had a balance of $3,925.09, for a total of $18,790.32.  When I started my debt-murder journey in April 2009, it had peaked at just under $30,000.

When my payments clear later today, that balance will be gone.

That is nearly $19,000 paid down in 8 months.

Now, the inheritance we picked up did accelerate our repayment a bit, but only by a few months.

Starting from $90,394.70 in April 2009, we have paid down $63,746.70, leaving $26,648.00 on our mortgage.

I’m more than a little excited, which–as usual–is the cause for the prematurity.

New goal: pay off the mortgage in 2013.

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Pros and Cons of Cashback Credit Cards

English money

Image by Images_of_Money via Flickr

The news that the Bank of America is introducing a cashback credit card is of little surprise. The credit card industry is competitive and customers enjoy the thought of earning while they are spending!

There are both pros and cons of cashback credit cards however and they are not suitable for every circumstance. So, before committing to a card, consider the advantages and disadvantages.

Firstly, cashback cards can be financially profitable but this depends on whether you have the funds to make the repayments. If you are having difficulties with debt, these cards are probably not the most suitable.

The strategies for maximizing your benefits from cashback credit cards depend on making repayment deadlines. Prioritize cards that have a 0% APR introductory rate.

If you can make your repayments within this 0% interest rate, or on time each month, you will not incur any interest charges. It is important to be organized so that you always meet repayment dates.

Once the 0% APR has finished, cashback credit cards will often then revert to a high APR. If you cannot pay all your debt, these charges will mount up quickly.

If this is likely to happen to you, consider looking at alternative cards with a low but constant APR, so that you do not encounter such high charges while repaying your debt.

Cashback cards are not always the smartest move financially when it comes to outstanding debt. Although they may offer a 0% balance transfer, this is not always as simple as it sounds.

If you transfer an outstanding balance to a new card, even with a 0% APR introductory period, any repayments made will be charged against your newest purchases.

This means that it is more difficult to pay off the original balance transfer if you are also using the card to purchase new items and of course, it is very tempting to do so as you have the 0% APR available.

Be aware that if you do not pay the balance transfer amount by the end of the 0% period, you will then have to pay a much higher rate on this amount.

So you either need to be sure that you can pay off the balance transfer in full in addition to new purchases or consider using a separate card just for a balance transfer.

Although this may seem more work, it can potentially save you a great deal of money in interest charges. Remember any credit card is only worthwhile if it helps you manage your money.

Some cashback cards also have a minimum spend requirement and often this is paired with a specific time frame. Read all the criteria about the card before committing to it.

Otherwise, you could be charged for not reaching the minimum spend limit or not doing so within the required time frame. Consider these issues when choosing a card.

Cashback cards can be very useful and allow you to earn money while you are spending, but they need to be used with wisdom. Research your options to ensure you select the right card for you.

Post by MoneySupermarket.

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20 Lazy Ways to Save Money

Single point of failure
Image by Paul Vivier via Flickr

Investopedia ran a post on 20 lazy ways to save money.  I thought it was worth sharing my take on the post.

1.  Schedule automatic payments. I do this obsessively.   I run all of my regular payments through my bank’s online bill-pay.  I think there are 2 bills that get paid manually; 1 is a quarterly payment, the other is due annually.

2.  Eat your groceries. According to the post, Americans–on average–throw away 15% of the groceries they buy.   I totally believe that.  We don’t throw away that much, but it’s still too much.  It tends to be the fresh vegetables, which we eat as side dishes instead of the main course.   We need to switch that mindset, both to use the vegetable efficiently and to eat healthier.

3.  Bundle services. I refuse.  I hate the idea of having a single point of failure for multiple systems.  If the power goes out, I lose my cable, but I keep the phone.   If, for some reason, I can’t pay my phone bill, I don’t lose my internet connection.   I like keeping these things separated.

4.  Pay off credit card. Hardly a lazy process, but otherwise…duh!

5. Mark your calendar. I use my Google Calendar as obsessively as I use automatic payments.  I put in reminders, grocery lists, or anything else I need to know at a specific time.

6. File your taxes on time. I just helped a friend dig out of this mess.   I pay as soon as all of my paperwork is delivered.   The IRS doesn’t give up and they have leverage, including garnishment and even jail.

7. Roll it over. When you change jobs, take your 401k with you.  Don’t leave it behind like a series of red-headed stepchildren.   It’s too easy to lose track of the accounts.   Don’t cash it out!  I made that mistake once and lost far too much to taxes.  A rollover doesn’t count against your 401k contribution limits.

8. Switch credit cards. If you can a good balance transfer offer that’s followed by a better interest rate than you currently have, use it.  But don’t forget to pay attention to the transfer fees.  Do the math.  If it costs you $500 to transfer the money, how much interest do you have to save to make it worthwhile?

9. Use your privileges. If you have a AAA membership, use it.  It gives you a discount on hotels, oil changes, car rentals, and more.   Read the paperwork. Former military gets a ton of random discounts, too.  Ask.

10. Rent instead of buy. Renting can save you money over buying, if it’s something you’ll only use once, but borrowing is free.

11. Buy instead of rent.  Rent-a-center is a ripoff, but they can’t even legally operate here.  If you’re going to use something regularly, buy it.

12. Ask. I love to call up every company I give money to and ask if there’s a way I can give them less.   Outside of chain stores and restaurants I almost always ask for a lower price.

13. Just say no. Extended warranties are generally a waste of money.   However, if I can’t afford to replace the item, I do get the warranty.  On my car, I brought it in for a full inspection and repair a few weeks before the warranty ran out and made all of that money back.    We are slowly building a warranty fund to replace the need for any future extended warranties.

14. Have the awkward conversation. We tried giving gift-giving the axe, but nobody enjoyed that.  Now, we cap the gifts at $20 and do a round-robin type of gift.  $40 for gifts keeps 10 adults happy.

15. Eat at home. Generally, I can cook almost anything better at home, but I really do enjoy eating out and trying new restaurants.  We just keep it from being a regular expense.

16. Balance your checkbook. What a waste of time!    With automatic payments and cash for all of the discretionary budget items, I balance the checkbook once a month.

17. Stick with your bank. Either use your own bank’s ATM network, or use a bank that refunds ATM fees.  I only take out cash on the first of the month, for the entire month and I do that with a teller, so this is never an issue for us.

18. Use your TV. Cable movie packages instead of a video membership?  Really?  That’s a horrible idea.

19. Quit those bad habits. I quite smoking, saving $200 a month.  I don’t drink much and I’m working on fixing my eating habits.   Vices are fun, and this is certainly not a fun way to save money.

20. Forget the pet. There is no way this would fly at my house.  we have 5 cats, 2 gerbils, and a dog.   Our renter has 2 pythons.  We’re a flippin’ zoo and honestly, mess and cost aside, we all like it that way.

How do you stand on these ideas?

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Credit Card Glossary

As evil as credit cards are, most adults have one.   Have you ever wondered what percentage of those people know the details of[caption id="" align="alignright" width="196" caption=" "] [/caption] their credit card agreement, or even what all of the terms mean?

Here’s a quick list of the terms and their definitions.

  • Average daily balance – This is the balance most card companies use to calculate your interest.   They add the balance each day and divide it by the number of days in the billing cycle.  This number times the interest rate is (roughly) the interest you have to pay.
  • Annual Percentage Rate(APR) – This is the interest rate expressed as the interest accrued in one year.  The actual calculation is much more complicated.
  • Balance transfer – If you’ve ever paid your VISA with your Mastercard, you’ve done a balance transfer.  These often have a great introductory rate and a lousy permanent rate.
  • Cardholder agreement – This is the contract that defines all of the terms of your card: interest, default consequences, payment terms, and everything else.  You should never sign for a card without reading and understanding this document.
  • Charge-back – If you dispute a charge on your card, the issuer may issue a charge-back, and take the money back from the merchant to return to you.
  • Credit line – This is the amount you are able to charge.  You should fear this number and stay as far away from it as possible.
  • Default – When you stop paying your card, you become delinquent.  If it goes on too long, you will be in default.  Read: screwed.   This is when they crank your interest rate to the sky and cut your limit to match your balance.  It’s also the point that affects your credit rating.
  • Due date – This is the day which, if you miss it, will cause you to acquire an extra $15-39 fee for the privilege of misreading your calendar.  Always pay your bill before this date.
  • Finance charge – This is the actual interest accrued for the billing period.  This is money you are paying for the privilege of borrowing the rest of the money.  Next month, you’ll pay a finance charge on this money, too.  Yay!
  • Grace period – For most cards worth owning, you get 20-25 days before the issuer starts charging interest.   The best way to manage your card is to pay it off completely twice a month.   That way, you’ll never use up your grace period and never pay a cent of interest.
  • Introductory rate – Many cards will offer a crazy-low interest rate for six months to lure you in…like crack.  They’ll get you hooked, then raise the rate and force you to charge new toys at the higher rate.   Ideally, you’ll never carry a balance, so you’ll never have to worry about the introductory rate.
  • Minimum payment – If debt has an evil heart, this is it.   If you pay nothing but the minimum required payment, you will be in debt for the rest of your life.  Always pay more, even if it’s just an extra $20.
  • Over-the-limit fee – If you ignore your credit limit and keep spending, you’ll get hit with another $15-39 fee for the privilege of not controlling your irresponsible impulses.
  • Periodic rate – This is your APR expressed in relation to a specific time frame, usually as a daily periodic rate.  For example, if your interest rate is 18%, your daily periodic rate is 18/365 or 0.0493%
  • Pre-approved – When you get a pre-approved card, you are actually just getting a notice that you have been pre-screened as not being too much of a deadbeat for that particular card.  You will still have a full credit check before the card is issued.
  • Secured card – If you’ve got lousy credit, sometimes your only choice to repair it is to get a prepaid card.   You give the company $200 and they will let you charge $200.   They are almost always loaded with fees and are usually a very bad deal, but if it’s the only game in town…?
  • Universal default – Sometimes, if you default on one card, every other card you have decides to gang up on you, because your “risk profile” has changed.   Yet more proof of the evil that is credit-card debt.
  • Variable interest rate – Some card tie your rate to the Prime interest rate, so when that changes, your rate does, too.

Did I miss any terms?

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