﻿What comes to your mind when you hear the phrase "What's in your walllet?"
If you've been brainwashed by all the billionaire dollar marketing campaigns like me,
you'd automatically think of credit cards.
It's hard to imagine a world where credit cards didn't exist.
They control a major aspect of our financial lives - giving us ease of
transaction at the same time the source of our financial stress for millions of Americans.
According to research by Value Penguin: * An Average American Household
Credit Card Debt is $5,700 * 41.2% of all American households
carry some sort of credit card debt * Households with the lowest net worth
(zero or negative) hold an average of $10,308 in credit card debt.
However, on the flip side, credit cards do add significant value to our lives.
* They assist in improving our credit score that allows to us to get great
interest rates when purchasing homes * They record all our transactions in one
place making it easy to monitor our finances * And they earn rewards or cash back that
can be put towards future purchases The key is, how we effectively use
these little plastic cards so we control them, instead of them controlling us.
Hi, my name is Tae from Financial Tortoise - a channel dedicated to creating Personal
Finance content for the Sandwich Generation. Introduction: In this video, I'll share with you
the five best tips on how to use your credit cards wisely so you can juice all the benefits of using
a credit card, while avoiding all the negatives. Before we start, I've time stamped each habit,
so if there's any part of the video that you'd like to skip, then don't worry it's all right
there in the description Let's get right to it.
Number one, Never Carry a Credit Card Balance The first and most important rule is to never
carry a balance. Pay off your balance, full every month.
A lesson on How Credit Cards Balance Works: * When you carry a balance, the credit card
company charges interest on top of your initial purchase.
* Interest rates for Credit Card companies range from 14% to 30%.
This means if you buy something that costs $100 and don't pay it off in full before the due date,
it will cost you an extra $14 to $30. * You roll this balance month to month,
the $500 flat screen television you bought at black Friday special for a great deal, could end
up costing you a $1,000, when you add up all the accrued interest - not such a great deal anymore.
I remember my first week of college at the University of California, Irvine
(go zot zot). I was walking through the campus student center so excited to finally call myself
an adult and a college student - when a booth that was giving away free t-shirts caught my eye!
And they said all I had to do was just fill out some form to get a credit card that would
proudly display my university mascot - the anteaters. No brainer of course!
Few months later, after having paid only the minimum payments, I was straddle with
a thousand dollars of credit card debt and learned the harsh lesson of accrued interest.
Avoid Credit Card interest rates by paying your balance in full every month!
Credit card companies love it when people fail to pay off their entire
credit card bill at the end of each billing cycle. They make huge amounts of money,
when the user fails to pay off their entire credit card bill.
This is one way Credit cards can become super expensive! They can be great tools,
but if not used correctly, they can end up costing you a fortune.
Second Habit to Master, Always Pay on Time
Never be late with your credit card payment. The Credit card companies are in business
to make money and they love it when people don’t pay on time.
Not only will you waste money from the accrued interest and additional late charge fees,
you’ll also damage your credit report. Credit scoring systems take late credit
card payments into consideration when determining your score. This can make
it more difficult for you to get approved for loans or securing the lowest interest rates,
because any blemishes on your record are associated with a higher risk of defaulting.
Friends don’t let friends miss their credit card payment.
If you can’t afford to pay the balance in full, at least pay the minimum payment.
The easiest way to avoid this ridiculous error is to set up automatic payment.
All credit card companies allow you to do this on their website and you never
have to worry about forgetting a due date. If for some reason you accidentally missed
a payment, give the credit card company a call. They are usually lenient with first
timers and you can get your fee waived as well as avoiding damages your credit report.
Third Habit, Never Use Credit Card Cash Advance As I mentioned earlier, Credit Card companies
are in the business of making money. So they will come up with all sorts
of tricks to get you to use their credit cards as often as possible.
One of them is Cash Advance – using a credit card like an ATM, so you can have access to cash.
This ranks up there as one of the biggest credit card sins.
Cash advances aren’t subject to the same terms as traditional credit cards,
so they come with a very expensive price tag. * High Interest Rate: Cash advances comes with
Super high interest rates. Much higher than the regular interest rate on the credit card.
For example, Credit Card companies can charge anywhere from 20% - 30%. In my mind, it's a
criminal to charge that much in interest rate. * Fees: Cash advance comes with additional
fees. There are cash advance fees and ATM Fees which you will have
to pay on top of the interest. This can range up to $20 or a
percentage of amount you withdraw. * Immediate Accrual: And they will
start charging interest rate on the amount you pulled, the moment you get the cash
So when it comes to cash advance, just don’t do it.
It could sound like a good idea when you are in a pinch, but trust me when I say – its not.
Credit Card cash advances can be a quick way to dig yourself deeper into debt,
and end up costing you hundreds, if not thousands of dollars very quickly.
Habit Number 4, Evaluate Rewards Carefully To be fully transparent,
I am a big fan of credit card travel rewards. By responsibly using travel reward credit cards,
I was able to take my family to places like Hawaii and Asia for the fraction of the cost.
However, I’ve also seen people who’ve gotten carried away with all these
rewards credit card and paid a hefty price. Whatever “free stuff” you are offered,
they are not a good deal if you are paying extra to receive them.
If you are someone who pays off their credit card in full each month,
then Credit Card Rewards can be a great way to get free stuff.
However, if you do carry a balance from time to time or struggle to stay on top of your credit
card bills – you want to stay away from being enticed into rewards Credit Card.
Few tips: * Annual Fee: If
you have a card with an annual fee, make sure you evaluate its worth carefully. For example, I once
had Credit Card with a $450 annual fee and it came with an airline credit of $300. So in my case,
the Credit card was worth the annual fee since I traveled frequently for work. However if you are
someone who doesn’t spend a lot on airfare – then this type of Credit Card might not be worth it.
* Benefits: If you have a credit card with perks like purchase protection,
rental insurance or access to airport lounges, make sure to use them! What’s the point of having
these cards, if you don’t take full advantage of its benefits. You are already paying the annual
fee, make sure you read all the fine prints to maximize the value you are getting from each card.
Habit Number 5, Monitor Credit Report Regularly Credit cards are vulnerable to fraudulent
transactions. We always have a few in our wallet and use it for most of our transactions. As such,
it is very important that you monitor your credit report.
The Fair Credit Reporting Act entitles everyone to one free credit report a year through their
website, however there are free services that let you check your credit report more frequently.
Credit Karma is one such service that I use to monitor my Credit Report.
You have to create account to use their services, but it is a great way
to regularly monitor your credit report. You can have the service send you email
alerts, if there are new credit inquiries against your account.
As a good habit, put a reminder on your calendar to check your credit report at least once a month,
to keep an eye out on any unauthorized transactions or fraudulent activities.
Another good habit is to use a consolidated view of accounts through online software like
Personal Capital or Mint, so you can monitor all your charges from one portal. This saves
me a-lot of time from having to log into multiple accounts given I have more than one credit card.
Credit Card companies are required by law to report credit data on your Credit Report within
30 days, but it can take longer for other lenders like mortgage providers or car dealerships.
So make sure you check your Credit regularly, so you can catch any potential fraudulent charges
Thank you guys for watching. If you found value from this video,
please hit the like button, leave a comment and subscribe to the
channel so that you don't miss out on any of my other upcoming videos.
I firmly believe that being part of the Sandwich Generation doesn't have to mean financial stress.
With careful planning and preparation, we can thrive during this stage of life.
Help me spread the knowledge. Thank you again and I'll see you in my next video.