Friday, October 3, 2014

Five tips for keeping your Credit Spending under control

It’s easy to tell people that getting credit spending under control is to not spend money on credit cards, but in today’s economy, that’s often easier said than done. Still, it would be remiss to suggest that there is any other way to reduce credit spending aside from not using credit cards, so let’s just make that number 6 in our list, and get the obvious answer out of the way. Realistically, that’s the best way to undo years of credit spending, but it certainly isn’t the only answer. Besides, there’s more to credit spending than just credit cards. Car loans, mortgages and cell phone plans also comprise types of credit that we undertake as consumers every day, and in their own way, each can be as damaging to your credit as the others are. Only by being conscientious can you get spending under control, and then keep your finances in check.

First on our stop of five tips is to make a commitment to yourself that you will pay off the balances on your credit cards every month. Obviously, this isn’t easy, but if you have to use credit cards for one thing or another, this is the best road to follow. Chances are you’ve got some existing debt, so you’ll have to get that paid off before you can really make this ideal a reality, but the result will be that you won’t carry balances on your cards that accrue interest, you won’t spend more than you make in a month, and you’ll boost your credit rating more quickly than you might think. After all, a record of on-time payments is one of the biggest contributors to your credit score.

Second, limit your credit spending on non-essentials or small items. Consider only using your credit cards for things you may not have cash on hand for. For instance, if you’re buying lunch during the week, don’t put that on a credit card. Use cash. If you’re buying gas for your car, then use credit, since many credit cards provide incentives to use their cards for just such purposes. That way, you can limit what you spend on the card, and the balance won’t be an astronomical figure when the bill comes later in the month. 

Third, make the biggest down payment you can on big items. From computers to cars and houses, down payments make a difference when you’re using credit. Obviously, for computers, you can sometimes find store financing that offers 0% interest for a set number of months. These are great deals, but they don’t always materialize when you need them to. Making a big down payment will significantly reduce the amount of interest you pay, thereby reducing the amount you’ll be paying off by the end of the financing term. Consider this: Putting $5,000 down on a  $20,000 car will reduce the payments on a 3% interest loan over 60 months from $359 to $269. Then, applying $100 you saved to the loan every month will pay the car off a whole year earlier and save you a ton in interest!

Fourth, observe the rule of 48. If you’re walking through a store and there’s something you’re thinking of buying that costs more than $50, and you don’t have enough cash for it, take 48 hours to think about whether it’s something you actually need or not. More often than not, you may find that your old television, radio, or cell phone is more than adequate for your purposes, and you won’t necessarily need to get a new one.

Finally, try to get into the mindset of putting aside the purchase of things you really don’t need so much. Often, we find that the things we want are nothing but impulse purchases. From collectibles to food items, there’s a lot of marketing that goes into those items at the checkout counter and the store end caps, so don’t fall for it, and don’t make your bill any bigger than it’s already going to be. Removing the impulse items, in fact, could make it easier for you to pay cash and not have to worry about using credit anyway. Ask yourself, “Do I really want to dust this thing every week?” or “do I really want to have to do the exercise to work this candy bar off?” Chances are, the answer is no.

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