Credit card companies can be sneaky sneakers. They have trickster ways that entice us to spend more, pay off less, and dig ourselves deeper into credit card debt. Years ago when I clued in and figured out how my credit card company was pocketing my pay check, not only did I beat $17,000 of debt but I stopped screwing up my financial future by learning to stick it to my credit cards.
Sure, it’s not hard to get tricked by credit cards. With all the enticing minimum balance payments, high interest rates, and ease of use it’s pretty darn easy to fall prey to the power of plastic.
But unless you love paying the price for plastic, it makes good financial sense to get wise to the credit card game. Using your credit card the smart way and avoiding the common pitfalls will not only save you lots of money but might just screw over your credit card company and prevent them from getting your cash. You won’t feel bad, promise. Here are 5 legal ways to screw your credit card company:
1. Pay More than the Minimum Balance
If you’re stuck for the month and can’t pay off your credit card balance in full, then aim to pay more than the minimum balance. Paying the bare minimum on your monthly balance only prolongs the debt agony and increases the amount of interest you pay to the credit card company — and that’s how to get screwed!
Depending on the size of your debt, you may add thousands to your wallet each year by adding a few more dollars to your monthly payment. For example, on a starting balance of $2,200 with an annual interest rate of 18%, your debt would be paid off in 8 years and 6 months if you paid only the minimum balance of 4% of the initial balance. The total interest paid is a massive $1,193.54 on an initial loan of only $2,200. If you can’t pay your card off in full each month, try to at least double the minimum payment so you’re actually taking a bite out of the principal.
Want to see how much paying the minimum balance is costing you? Check out this handy Credit Card Calculator for the scary results. You might be shocked!
2. Pay Credit Card Balances in Full
Fully paying off your credit card each and every month is a sure fire way to screw the credit card company. With some credit card interest rates well over 18%, it’s easy to lose a bundle by not paying off monthly balances. It just makes good financial sense to keep that money for yourself — you worked hard to earn it after all!
Besides, paying off your credit card balance in full helps you to establish a good credit rating, improve your credit score or FICO score, and build an excellent credit report for lenders to reference if you’re in the market for a mortgage or a loan.
If you need convincing, here’s a 5 Minute Guide to Your Credit Report and Credit Score to get you thinking seriously about paying off your balances.
3. Pay in Cash
Skip plastic altogether by spending what you have, not what you hope to have in the future. By keeping honest with your cash on hand you won’t be borrowing against your future to deal with high interest credit card debt.
Besides, sticking to a planned spend rather then getting seduced by a sexy sales sign is how to win the credit card battle and ultimately win the war against plastic. If you’re feeling the call of plastic over cash, then try posting a sticky note on your card with a reminder not to spend beyond the cash you’ve set aside.
4. Negotiate a Lower Interest Rate
If you’re carrying a balance on your credit card, don’t be afraid to call your issuer and ask for a lower rate. Many lenders will cut you a break if you’ve been paying the minimum balance each month, and they may reduce your monthly interest rate if you ask nicely.
It costs you nothing to pick up the phone and negotiate a lower interest rate with your lender and could help you pay off your credit card sooner. A cut in rate from 22.5% to 15% on a $5,500 balance could save you almost $500 a year!
It’s the new math people — be a kind a courteous bill payer, ask for a better interest rate, and then kindly kill your credit card debt faster.
5. Students — Stay away from Free Frisbees!
Don’t get hit in the head with a piece of flying plastic by signing a new credit card application on campus. Credit card companies love to entice fresh-faced college students with free stuff like T-shirts, food, and Frisbees in exchange for a student credit card. These plastic peddlers often set up booths on campus to get your attention and to get you spending on credit sooner. Do yourself a solid and take a pass on this collegiate debt game play.
If you need a credit card while studying at school, ask your parents for help with finding a good lender and get an education in paying off the balance. There’s no sense in getting schooled by debt and getting taught a lesson in credit when you’re just looking for a way to pay for tuition.
There must be countless ways to win the war on credit cards so I might just add to this list in a later post.
UPDATE: Read Part Two: 5 MORE Ways To Screw Your Credit Card Company
Penny for your thoughts? Got another way to politely screw your credit card company and pay off your plastic debt sooner?