CNN just published an interesting article on how to give up credit cards and manage debt. I thought to share it with you here! What more, a fellow blogger and Money Writer, Frugal Dad, was mentioned in the article, which is pretty cool to say the least.
Managing Debt Wisely: Thoughts On Credit Cards
Some thoughts on this? Here are a few pointers I took from the article:
1. Be conservative about debt.
Debt is not a tool. “It’s a method to make banks wealthy, not you”, so sayeth Dave Ramsey in his website. I definitely espouse this philosophy as I’m pretty conservative about borrowing, and carry a mortgage as my only debt load.
2. Credit cards are a tool, they are not evil.
I agree with this point as well. If you’ve got the discipline and self-control, you can make credit cards work for you rather than against you. For instance, you can take advantage of rewards cards to save money! By comparing credit card offers, you may find the right kind of card for you. But if you’re unable to control your household debt and basic expenses, then cards can be quite dangerous; in this case, I’d avoid them like the plague!
3. Avoid carrying a balance.
I echo what Frugal Dad says about this. Carrying a credit card balance is dangerous, especially in a tougher credit environment. Credit card companies can very easily change the rules on consumers by raising interest rates without warning, reducing credit limits or closing accounts. Don’t get caught!
4. Consider using cash or debit cards.
To better manage your spending, the recommendation is to use cash and debit cards rather than credit cards. If you find yourself having trouble with keeping your spending down, this approach can help you stay within budget more easily. Credit cards are a high risk tool for those who struggle with their spending.
Just last night my wife went back and forth on whether we really needed our credit cards. They’ve been the downfall of our budget the past couple months, but I feel like we’ve finally worked out a solution. It’s always good to keep these facts in mind, though, and to use credit cards carefully and evaluate how you’re using them.
Other than paying for my cell phone bill, I haven’t used my credit card regularly in years. All of my purchases are done via cash or my check card. That way I do not have to worry about monthly interest charges or being surprised by how large my “debt” has become.
Credit cards can be very dangerous if you are not careful to keep track of your spending. It makes it so easy to over extend yourself and difficult to get out of debt once it starts. I think having one credit card is best for emergencies and all other expenses should be through a debit card.
I use an American Express card that gives me 1% to 3% cash back on every purchase and then I just set the card to automatically pay off the balance in full from my checking account every month.
I found out your article very useful. “4. Consider using cash or debit cards.” – with my spending, I think I have a good chance to get my account locked.