THE TEN COMMANDMENTS OF CREDIT CARDS: #1

by Don Rose, Writer, Life Alert

A CREDIBLE CREDIT CREDO TO LIVE BY

During the process of creating “credit card commandments” (see the next few posts to come), I came up with a credit credo: “Once you get it, don’t regret it.”

This motto actually has multiple meanings.

First, obtaining credit cards to help pay bills over time is fine, but you need a plan to manage the resulting debt, especially when the degree of credit card usage rises during tough times. Learn the most important rules for handling credit cards, and you won’t regret getting those cards in the first place.

The second meaning is this: once you buy something using a credit card, don’t regret having bought it by paying much more for that item over time. This can occur if you only pay the minimum payment each month. Doing so adds a great deal to the final cost, thanks to accumulating interest charges on the amount you spent.

#1

Let’s assume you have two or more credit cards, you have bought some items with them, and now you have a good deal of debt to deal with. To help you manage this debt, and avoid regretting getting the cards and the creature comforts you charged, consider the following ten tenets of dealing with credit cards. (Extra credit if you already know them.)

1. Pay down credit card balances with your extra cash, rather than investing that cash.

When you pay down the balance of a card that charges 18 percent interest per year, it is like getting a guaranteed 18 percent annual return on the money you used to pay it down. It’s not easy to find investments that guarantee an 18 percent gain, so rule number one almost always applies. The general rule is this: if a credit card interest rate is more than the rate of return of an investment you are considering, pay down that card; if less, invest.