The Wrong Way To Use Your Credit Card
The Credit Card companies have acquired a bad name in modern society today. Unfortunately I have to be frank with you and say that it is not the card companies alone that are to blame, but also the users. If you use your credit card the wrong way, you will most likely get stuck with huge bills that are not only persistent, but are actually self-inflating. In other words, the bill simply grows.

There are numerous credit card utilization advice on the radio, cable networks and the internet. All you have to do is pull any search engine and search for “Credit Card Utilization Advice” . There are at least 10 very good results just on the first page of returned results on Google. However amidst all the tons of information, 49 million results on the big G, there lies one simple principle. This principle is what makes the Government allow the credit card companies to do business in America.

“Do not incur expenses that you can not pay for”.

If you do, then you will have to pay interest after 56 days and that is how the companies make their money. The one way not to use credit cards is not to carry a balance that you have to pay interest on.  The interests can be hefty, usually starting at low teens and easily creeping up into the 20s and 30s. Granted with the new Credit Card Laws things will change, but the smartest people work for credit card companies so users beware.

Purchase Protection Giveaways

In 2008, I started using American Express Credit Card. This was one of the lower cadre rewards cards, Blue Cash. It has no fees and it came with a 0% for 12 months promotion as well as an 8.9% APR.  The APR has since changed to 10.98%. It was really useful at different times during that promotional period when I carried balances that ranged from $1000 to $3000. However to ensure that I did not have to pay any finance charges, I made sure the card balance was a resounding ZERO for a full six weeks before the anniversary date in November 2009. That way I escaped any fast ones being pulled off by the company and saved myself a few hundred bucks in charges.

This card comes with some perks and one of them is the Purchase Protection Perk. It is explained in good detail by Jim Wang over at Bagaineering.com.  According to the post:

Use your AMEX card when you pay and you get 90 days of protection against accidental damage or theft. You file a claim and the protection replaces the item or reimburses you up to the amount of the purchase price. There’s a limit of $1,000 per occurrence and up to $50,000 per cardmember account per year.

This is cool because it gives you that peace of mind that yes indeed if anything (well almost anything) happened to your purchase, you are covered. I have never had to use this perk, but it is sure a free insurance going on there, maybe “purchase insurance’. Some of the commenters on the post like Pop of Popeconomics.com say it is also available from all cards with VISA. So do not go rushing to get a new AMEX just yet. Do your groundwork and use your VISA!

It is very easy to systematically save for your children. Obviously, you have to at least have children to be able to do this in a reasonable manner. It is one of the ways to take advantage of the automation that we have with the advent of internet baking and online access to bank accounts. Some banks may indeed give you a hard time when you try to implement this, however if you shop around for banks, I can bet that you will find a bank that will let you do it. Most banks these days have online banking and free bank transfer, so it should be no real big deal.

First step

The first thing you should do is set up an online savings account. ING Direct, HSBC Direct, American Express Savings and many others depending on your country.

Next step

Next thing to do is to link your main checking account (current account) where your salary/payment/wages would usually go to your new savings account. By doing so, money can seamlessly be transfered between the two accounts. However in the US, it usually takes 2-3 business days.

Final step

The final stage is to go into your savings account and setup regular periodic transfers from your checking account into this savings account. Start with something small. I advice using say the age of your child. If you have a three year old child, you can set it up to transfer 3 dollars every week into the savings account. That translates into 162 dollars in that year. You can then increase it during your child’s birthday to four dollars and do the same thing again over one year.

The Payoff

The advantage is that this money will be quite small and you are not likely to miss it. It will increase gradually over the months and years and by the time the child is say 15 years old, you can comfortably assemble 780 dollars in one year for driving lessons or some other important thing for this child.

Adjust to taste

Depending on your earnings, you can do this as often as you like such as twice a week or once a month; you can also save by a factor of 2 times age in years, or age in years times grade in school. The most important aspect will be that it is automatic and that the money is not easily accessed.