Secrets to Effective Debt Management
4. Use a Different Card for Convenience Expenses.
If you use a credit card for convenience (having dinner out where checks are not accepted), use only one card for these expenses and not the card you use for financing other purchases. This is the card you're going to pay in full every month.
Set a budget for this card and keep track of how much you're charging. If you're comfortable paying off a $200 balance each month, don't charge more than $200 on it.
5. Seek Out Low-Rate Balance Transfers
Ideally, the third credit card you're not using will periodically offer you low-rate balance transfers, such as 4.99% or less for the life of the balance. (You can also call to see if they have such offers available.) If the balance on the card you're using to finance purchases becomes significant (say $2000 or more), consider transferring that balance.
Be careful not to accept an ultra-low short-term rate (0.99%
for six-months, for example) unless you know you will be coming into the money necessary to pay it off before the rate skyrockets.
Also beware of transferring if the card's interest rate on purchases is not reasonable. The reason is that you will start using this card for your financed purchases so that you still have only two cards to pay on. The one you previously used for financed purchases you're going to retire temporarily.
6. If You Can Stay Disciplined, Accept Other Card Offers
Even though you maintain a balance on only two cards, it doesn't hurt to acquire more than three. This gives you a variety of competing offers to choose from for balance transfers and lower rates on purchases.
7. Rotate the Card You Use for Convenience Expenses
Every six months or so, retire the card you've been using for convenience expenses and paying in full each month and use a different card for the next six months. The interest rate isn't important because by paying in full, you're not charged finance fees.
Using each card for some period of time increases the chances that the card companies will compete for your loyalty by offering you better rates.
8. Don't Buy What You Can't Afford
These tips are intended to keep more of your money going toward the things you actually buy and not toward excessive interest payments. But if you use your credit cards to buy things you can't afford, you'll be digging an ever-deepening hole that you ultimately can't crawl out of.
Stay disciplined.
