Ways to Save Money #10: Don’t Carry a Credit Card Balance
This is part ten of the Ways to Save Money Series.
Some of the referrals I promote on this site are for various credit cards. I battled with the idea of promoting cards when I myself had so many problems with them. However, I was able to triumph over my credit card addiction, and I feel many others of you are also able to resist the urge to spend when you don’t have the money to pay off the card each month. And that’s what this “Way to Save Money” is all about: Saving money by paying off your credit card balance each month.
This is one of those “Save money by not spending it” methods versus the trust “Sticking money in the bank” types. By paying off your charges in full each month, you’ll avoid paying interest on the balance. Granted, the credit card companies have some sneaky ways to trick you into messing up, such as changing the grace period or due date without notifying you (although they’re required by law) or burying the notice in some crazy amount of fine print. There’s only so much you can control, but by monitoring your statements and spending habits, you can seriously help your debt management efforts.
Since paying off our “legacy” credit card debt (i.e. the stuff from college, our wedding, our new house and some mistakes) back in September 2007, we still continue to use our credit cards. However, we have not carried over a balance on an interest-bearing account since then. We charge over $1000 per month for groceries, gas, dining and any other purchases in order to get cashback and rewards points and to track our spending more accurately (versus paying with cash only).
Granted, there come times that some of us truly can’t make ends meet that month, even if we’re maintaining a frugal lifestyle. Perhaps you’re only able to live paycheck-to-paycheck, and too many bills are due at the same time. You might have to charge a few to your card. I strongly advise that you don’t let those charges ride past the due date or you could easily find yourself in a hole. It’s not hard for the interest to become overwhelming, especially on a high interest card. But if you do slip one month, don’t think “all is lost!”, because it isn’t. Just pick back up where you left off and tackle that credit card debt. Don’t let it pile up month after month.
So in summary, by paying off your credit card balance(s) each month, you’ll avoid paying interest, potentially earn rewards and cashback, and utilize the convenience of living in a cashless society. You can then use that additional income to tackle other debt, increase your rainy day fund, or contribute to your retirement account!