How you manage
your credit cards is a key measurement that credit reporting agencies use when quantifying the credit rating of an applicant
Card holders who pay their card balances
on time, at the required amount, will
receive a favorable credit rating that
translates into lower interest rates on
mortgages and consumer loans.
Card holders who are late in paying their
credit cards payments, often not paying
the required amount as due, will receive
a less-than-favorable credit rating that
translates into rejected applications
or higher interest rates for mortgages
and consumer loans.
Review techniques for managing credit card payments
review our discussion for managing loan debt. It provides excellent techniques for payment and debt management: view techniques
We have two
credit card management programs for review:
A: for card holders who
control their credit card use and
payoff credit card balances in full
B: for card holders who
carry credit card debt and pay only
the minimum balance each month.
Manage Credit Card Use:
Program A: Maximize Credit Card Benefits
These steps are for
card holders who have the discipline to
control credit card purchases.
Your objective under this program is to
build a usage pattern that strengthens
your credit rating and builds credit card
First, you will treat your credit card
like cash, deducting from your money account
the purchases you make with your card.
You can either deduct the amount by making
an entry in your checking register, or
using your Personal Financial Management
Software (PFM) such as Quicken® or MS
Basic rules for this card management program:
— keep good accounting
— record every transaction
— deduct money from your account
for each purchase
Pay the entire balance each month. Never
carry a credit card balance. The money
to pay the credit card balance should
be available from the money that has been deducted from your money account.
Limit your credit cards to 2-3 cards maximum.
Select your cards with the following features:
Take a pair of scissors and cut
all of your cards in half (except
for the two cards you selected).
Store the pieces in a jar as a
reminder of your credit management
the two remaining cards away for
emergency use only.
Enroll into a pre-paid credit
card program. Pre-paid cards work
exactly like credit cards but
function as a cash card. You load
to the card the amount you need
and use the card like a regular
credit card to make purchases,
arrange reservations, etc.
The advantage of pre-paid's is
that you limit "instant gratification"
since the amount you spend is
set by the amount you budget and
load to the card.
As you pay off each credit card
balance that is remaining on the credit cards that you ripped up, call the creditor and
request that they close your account.
Note: it is important that you
close your account to remove the
credit card from your credit report.
Throw away any new credit card
offers that come in the mail.
Hang up on telesales representatives
hawking credit cards programs.
Refuse to enter into any financing
agreement with a furniture or
home improvement retailer.
After about 12-18 months using
PRE-PAID CREDIT ONLY, you can
now jump to Program
A above for maximizing your
credit card benefits.