However, after a few phone calls, I found out that we were in an excellent position for this trip because of the following:

Our “Big Bank”

I’ve been a Bank of America member for about a decade now, and while I was very close to killing my account recently from their attempt at a $5 fee for debit card transactions, I decided it wasn’t worth the bother. I’m glad I didn’t because one of the major banks in Germany, Deutsche Bank, is part of the “Global ATM Alliance“, and thus we didn’t have any ATM fees.

One thing when you’re dealing with foreign currency is to make sure you don’t withdraw too much because you might get stuck having to exchange it back to US dollars and paying another fee.

Your best bet is to use a credit card…

Our Credit Union

While we have a number of credit cards, they all had foreign transaction fees (FTF’s), which can range from 1%-3% (or more for some seedy credit companies).  But while calling through our credit card companies to find out the best option, I found out that recently our Pentagon Federal Platinum Rewards Card dropped the foreign transaction fee! Not only that, but I learned that the card also offers 5% cash back on gas all the time. When I first got the card, it was 3%, but I hadn’t checked up on it until I heard a radio ad for the card and heard 5%.

So with a combination of a big bank and a credit union, we were able to avoid a chunk of fees during our stay overseas. Capital One and AmEx used to be your only choices for cards with no foreign transaction fees, but now Pentagon Federal Credit Union has joined the mix

Drawback #1: Not what many consider a true gift

Let’s be honest here. The whole point of a gift is to demonstrate to a person you’re thinking about them. It’s not just about the money you put into it, but also the time and effort in searching for and picking out that perfect item. Does a gift card accomplish all those things? Definitely not! In fact, you could even argue the opposite – it shows that the recipient isn’t important enough to spend your time and energy on. Instead you’re just grabbing one of these cards during checkout at CVS or the grocery store.

Drawback #2: Not very memorable

Since I was born in the 80’s, I grew up in the gift card era and received plenty of them from family for Christmas, birthdays, etc. But you know what? I honestly cannot recall any specific gift cards I received, nor who I received them from. However when it comes to special and unique gifts, the memories stick in my head.

I should point out that I’m not just talking about those expensive Lego sets, but even small and inexpensive things. For example, when I was 9 or 10 I received a talking greeting card with my grandma and grandpa’s voice on it for Valentine’s Day. Although I unfortunately no longer have it, I can replay in my head exactly what was said and how it was said. It probably cost them less than $10, yet it was much more memorable than any gift card they ever gave me over the years. Don’t you want to give something that will be remembered, not forgotten?

Drawback #3: Not very safe

Even without cash back, airline miles, and other reward programs, the primary reason I’m such a fan of credit cards is because of the security they offer. If my credit card falls out of my pocket, I can just call up American Express and have them send me a new one. I don’t really have to worry about theft and fraud. But with a gift card, if you lose it you’re in trouble!

Furthermore, many credit cards including AmEx, Visa Signature, and World MasterCard offer built-in protections on eligible items for 90 days from date of purchase (for lost, stolen, and sometimes accidental damage to the item). On the flip side, a gift card offers absolutely none of these protections for your purchases. So if you use one to buy a new pair of shades, only to drop them on the pavement a week later… you’re out of luck.

Drawback #4: Not always money well spent

How many times have you received a card for a store you don’t really like? Or maybe you do like the store, but when you go there to spend it, you can’t find enough stuff you like… so you just end up buying a bunch of junk that will be rarely worn or used (in other words, wasting money). I know that has happened to me a number of times and I bet it’s happened to you before, too.

I don’t know what’s worse- wasting the funds on the card or not using them at all? Because it has been reported that 40% of recipients don’t spend a card’s full value. The opposite of that is also unfortunate- not wanting to waste the balance, so you end up spending more than the value (possibly buying stuff you don’t need or really want).

Last but not least, you also have to take into account the fees which may be incurred if the card remains dormant for an extended period of time. In most states, the card issuers can start nickel and diming away your balance whenever they want. Even in states like California that have laws for these cards, it’s still legal to charge fees in many circumstances.

Drawback #5: Not a good idea for gift exchanging

Let’s exchange gifts… I will give you a $50 gift card and you will give me a $50 gift card. Does that scenario make any sense whatsoever? Of course not! But when you boil it down, that’s what exchanging gifts means for many people nowadays. In my opinion it’s even more pointless than exchanging cold hard cash, because at least you will be able to spend cash where and how you want.

To make matters worse, it can be a bit awkward when both parties buy each other cards but they’re for different denominations. For example, let’s say you and I are friends and you bought me a $100 card for Christmas, but the one I bought you was only for $50. Instead of bolstering our friendship, that will probably lead to feelings of discontent!

Conclusion?

Despite my negativity towards them, in certain situations I do believe these cards make sense. For example, if the giving is a one-way street (such as your employer giving employees Christmas gifts) then giving cards to employees probably does make the most sense. In addition, I’m a huge advocate of using these cards for yourself, if you can buy them under face value. However when it comes to gift exchanging, they are perhaps the worst option out there. Need alternatives? Check out these 14 ideas.

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This is a guest article by Mike from CreditCardForum.com, a blog and forum about you guessed it… credit cards. From reviewing what he considers to be the top 10 credit cards to giving advice about disputing fraudulent charges, he covers every topic under the sun. With that said, he actually thinks it’s best to avoid using credit cards altogether if they will lead to higher spending and debt.

Sending in extra payments

We’re on a monthly payment plan, not one of those “pay twice a month” deals. Our payment is due the first of every month.

Now, I use online billpay with my bank to just send a check directly to the bank without the paper slip from the bill. But what I learned a few years ago when I tried to make a SECOND payment in the same month as one I already paid for was that the mortgage company applied the payment to the next month’s interest first, thus resulting in much less principal reduction. I was expecting the entire amount would go towards principal rather than the next payment, so I called the mortgage company.

You know what their rule is about sending “extra payments”?

You need to send the extra payment to a different mailing address.

Whahuh? If I’m sending in an extra amount well before the next due date, and the amount is not even close to the regular payment amount, then I would expect their “system” to recognize the intent is an accelerated loan payoff. But no, they want to strip out all the interest first and apply it to the next month no matter what.

I’m sure it makes sense in some financial world somewhere, but to me it’s idiocy. Therefore, I plan around it by just sending the extra payment in with the regular mortgage payment (same check) and avoid this special second address.

Can anyone explain the reasoning the mortgage company might have for this type of action? I should also add that including the memo “apply full amount to principal” or anything similar doesn’t work. You HAVE to send it to the other address.

People tend to learn the hard way that bad credit doesn’t just go away. It can take years to rebuild a destroyed credit score and fix financial woes. Often people experiencing financial difficulty find themselves in the dire straits, especially due to unemployment in the recent economic downturn. Overwhelmed by surmounting bills, it only takes few delinquent payments to ruin credit. There are a few things you can do to get your credit under control:

This sounds simple, but it’s important to pay down debt on your credit cards. Only use them when it’s absolutely necessary. Often people get themselves in trouble by having too many credit cards while only paying the minimum payment. Lower or eliminate all the debt on your credit cards, and keep only one or two cards for the future – picks the ones you’ve had the longest. This can help towards improving your credit score, especially if the balance is below 30% of the credit limit on each card.

Also, don’t close a credit card until it is paid off. Closing the card beforehand will not help improve your score. It’s better to pay down the balance than to close an account before it’s been paid off. Also, don’t open any new lines of credit, especially if your other cards are maxed or the debt is high. If you have a decent history with an older line of credit this helps your credit record and in turn will positively affect your score.

Responsibility is key to establishing a good history of credit. It’s easy to find your way into financial straits by using a credit card when funds are low, however, you must use restraint. Plan a budget, and live within your means. If you follow this plan there will be no unwelcome surprises when you apply for a loan, house or rental property. Bad credit and bankruptcy can follow you for a long time and make your long-term plans impossibilities.

Hey there Mike,  I have been following your blog for a few months now. I was just reading the “Our remaining Debt” and saw that you paid it off in 3 years.  I have about $18,000 in credit cards.  What do you suggest to pay these off as quickly as possible?

Just a quick update before I get into answering the question. If you haven’t been following the site, we started with well over $100,000 in consumer debt (not counting mortgage), and paid it off in about 4 years. Sure, there were minimum payments for about 5 years prior to that, but they barely made a dent in the principal debt owed. In that time, we also acquired new debt in the form of a couple cars, but paid those off either with the money earned from selling existing cars or from savings, which was an amazing feeling to even having a “car fund” in the first place!

Oh, and I’ll have another announcement about our debt situation coming up soon, so keep an eye out for it.

Now, for John’s question. Without details on interest rates, how many cards the debt is spread across, your income, etc., I can only comment on how WE went about getting rid of our $20,000 in CC debt (really it was up to $25 a few times).

1. Back in the day, like from 2001-2005, I was able to move our large balances around to 0% offer cards. Now, you can maybe still find the offers, but there’s no cap on the fee. Calculate the cost-benefit of paying the fee vs the interest on the card to see if it’s worthwhile to move the balance to a better interest rate. Also, keep in mind the duration (12 month offers are obviously much better than 6 month deals).
2. Once I finally committed to focusing on paying off the cards, I opted to pay off the couple of cards with the lowest balance. Now, the wisest thing to do is to pay off the highest interest cards first, however, getting those few little wins really helped our motivation to tackle the big balances. But, if your smaller balances are still daunting, and/or the interest rate is extremely lower than the other cards, then start paying off the bigger balances first.
3. Ok, now assuming you have been able to STOP SPENDING (hard to pay down debt when you keep accruing it), and that you have at least a few dollars in your budget to pay extra, then start sending the extra to just one card. Don’t try to tackle all your debt at once or you’ll feel like you’re spreading yourself too thin and you’ll probably give up.
4. Lastly, try to get extra income. I was able to pay off most of our debt over 4 years thanks mostly to the advertising revenue on this site (which most of you probably don’t even notice). It also helped that I had a good job in IT, but remember that I live in DC with a sizable mortgage, car loans, and student loans. I did one loan at a time, sometimes not the correct one, but we got it all paid off and we’re just working on our 2 mortgages now (more on that soon).

John, feel free to comment with additional information or other questions to help me refine my answer more. And same goes with all you other readers. Share your tips if they differ from mine. Is it more than just focusing on one debt, stop overspending and try to get extra income? How else did you motivate yourself successfully?

I’m personally motivated by goals. If I know there’s an end in sight, I can accomplish the goal. Otherwise, I procrastinate and never do anything. Others are motivated in other ways, so share your thoughts!

During that time, I opened a few cards and closed a few, but I’ve always sort of kept a core group of credit cards in our arsenal. I’m not a pro like some people when it comes to getting the best (I don’t even have an AmEx card anymore) or taking advantage of all the rewards programs. I tend to just carry a debit card and 2 credit cards at most, and those 2 credit cards are usually my Penfed Visa and my Discover More card.

Really, I only use the PenFed card primarily and keep the Discover card for our Sam’s Club membership, but sometimes I remember the rotating Discover categories (travel and restaurants in Q1 2011) and I’ll use it to get 5% cash back. But what about the rest of our credit cards?

Well, we had 9 cards total, and I decided to cancel 2 of them today:

1. Pentagon Federal
2. Discover (personal card)
3. Chase
4. Citibank
5. MINI (yes, the car…one of the legacy cards from the balance transfer days, but it has a great limit)
6. Kohls (our only store-branded card)
7. Bank of America (the only non-rewards card)
8. Discover (business card)
9. GM Card (again, from the balance transfer days, but this one has a tiny limit)

I cut the last two for a reason. First, I haven’t used my Discover Business card in 2 years and the More card gives me better rewards. That was an easy one because business cards don’t appear on your credit history.

Next, I dropped the GM Card. That was a tough one because of one reason: I had over $600 in earned rewards. Unfortunately, the points are only good for buying a new GM vehicle or GM parts, which I have no plans to do anytime soon. The limit was under $2000 and it wasn’t my oldest card, so there’s little impact on my credit score.

So that leaves us with 7 credit cards. We only use the Kohls card rarely when we get a really good coupon. We could probably find better deals in other stores and use our other cards for rewards. I never use the MINI card, even though points earned go towards MINI parts (and we have a MINI), but it has a high limit. I don’t use the Citibank card either (they just changed it to a different type of card, so I need to check it out more).

That leaves Chase and Bank of America. They’re my two oldest cards, and my Chase card is now a Chase Freedom card with rotating categories that competes with my Discover More card. Worth keeping.

The Bank of America card is my oldest card and it has a really high limit. The downside is they only offer teaser rewards for about 3 months. I used to have 2 BoA cards, but they closed one due to inactivity, and I only use this rarely to keep it alive. After learning more about the new way they calculate credit scores, I’m tempted to just cancel it and take the ding. We’re not financing anything anytime soon and it’s just a burden to manage (just knowing it’s there and can ding me when I don’t want it to is the burden).

So we have the opportunity to chop up 4 more cards and reduce our stack to 3, but it’s a tough call. I know it will hurt my credit score, especially since I’m considering dropping my oldest card and also cards with high limits. I maintain maybe a 1% utilization, which is nothing compared to the 50-75% I used to carry (or higher), so upping it to 5-10% shouldn’t hurt in the long run.

How about you? Have you dropped a bunch of credit cards all at once? Care to share which ones and why? Did you lost rewards/points in the process, like I did with the GM Card?

The offer ends November 8, 2010, so you have just over a week to take advantage of the deal:

• For a limited time – Get 25,000 Membership Rewards(R) bonus points when you spend $1,000 in your first 3 months of Card membership. Offer expires 11/8/10.
• 3-2-1 Points: Get Membership Rewards points up to three times as fast: You can get 3X points on airfare, 2X points on gas and groceries, and 1X points on everything else.
• No annual fee for your first year, a savings of $175.

Apply Now!

If you recall when I did this deal myself a few years ago, I cancelled the card before the year was up so I didn’t pay the $175 annual fee. But if you think you’ll use the card for the rewards and it beats out your other card(s), then feel free to keep it. Personally, I still love my PenFed Visa.

The Discover® More® Card comes with an intro APR of 0% on balance transfers for a full 12 months and purchases for a full six months. The Discover® More® Card is also one of the better cash back credit cards available today, offering 0.25% cash back on your first $3,000 in annual purchases and 1% cash back thereafter. Plus, cardholders can earn 5% cash back on rotating categories each and every year. With no annual fee, the Discover® More® Card is designed for those with good credit.

To sign-up for the Discover® More® Card and take advantage of the limited time $75 cash back offer, visit the official website of The Discover® More® Card. More information is below (click through the article link from RSS if you don’t see it):

Any purchase you make will receive 1% cash back and each month you’ll have the opportunity to earn 5% cash back on rotating categories. For the months of July, August and September, 5% cash back can be earned on the following purchases:

• Gas
• Airlines
• Hotels
• Car Rentals

Visit this Costco page and sign up for a new membership online with any American Express card, and get 2 months free.  But, if you don’t have an AmEx card yet, go get a TrueEarnings® Card from Costco and American Express, and THEN sign up for the Costco membership. Just be forewarned that if you get the card but don’t have a Costco membership, there is an annual fee. Therefore, be sure to follow up with AmEx to tell them your Costco member number!

* New membership: two months free offer is valid only for new members for the first year of membership. Costco membership must be purchased on-line and paid in full with any American Express Card. To receive 2 months free, membership must be purchased by June 30, 2010.

Mandated Disclaimers: This content is not provided or commissioned by American Express. Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program. This site is not affiliated or endorsed by Costco and does not provide memberships.