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To start off this Thursday, here is a joke. How much money does a skunk have? One scent! Ok enough already.
You may feel like you only have one cent to your name after paying bills and discovering that what you paid on your credit card bill didn't have much of an impact.
When it comes to financial institutions that issue credit cards, one thing to remember, these firms are in it for the profit. They do not lend you money to be their friend. If they did, they wouldn't be charging you interest. As any corporations, they thrive on making profits and these profits are your hard-earned money.
...They do not lend you money to be their friend.
To make profits, these firms have to entice you with some incentive. After all, it would be like a local bakery competing against another bakery. Sometimes there are specials and deals, just to get you to come in for their business.
Credit card companies will do the same marketing ploy. Some of these ploys are "0% for 12 months" or "The Best Card for You" is the latest I've seen, and many many more.
Such firms will automatically charge you a fee known as the annual fee in most cases. This dollar amount is vastly spread from $25 to $500 per year.
What this means, is that even if you got a sweet deal like 0% for 12 months, you'll be slapped with an annual fee based on that firm's rates.
So wait?!?!? I have to pay them something when I haven't used it? Yes. They [the credit card companies] consider it as a small fee for doing business with you. It is to keep your card active and "reserved for use". Like I said, they are going to get their money.
Fortunately not all cards will charge you an annual fee but doesn't it warm your heart when you pay this annual fee that the same firm can offer your rewards and points? Basically giving you back your money.
While some firms won't charge an annual fee the first year, they will the following years. One viewer mentioned to me that he could just cancel his card. True, however, consider the impacts to one's credit score. (Read my blog: Credit Utilization) I also want to recommend that as part of your summer financial check-in, review your credit report. Credit Sesame offers you a free credit score NOW so I encourage to review your credit report for any errors or issues in order to address it immediately.
Understanding credit cards isn't complicated. When accountants are calculating finances, there are only sides of the money pot: DEBIT & CREDIT. In layman's terms, you either have money or you don't.
The simple solution to not using credit cards really boils down to a few steps.
#1 Look at your Budget
Reviewing your spending habits is the main priority why many families fall behind on their bills.
Another reason is the culture. We have the tendency to keep up with the Jones's. Sometimes we need to recognize that we do not need that new car or that big of a house.
I have special budget offers for my viewers to get you started in the right direction. You can either purchase one for less than a dollar at my ETSY Store or you can subscribe to my email weekly updates HERE.
#2 Stick to your Budget
Once you know where you money is being spent, you can observe and correct. Some might refer to it as Lessons Learned. You have to annotate where you overspent on your budget and then make the necessary corrections to avoid overspending which leads to overdraft charges (which are quite steep today) and utilizing a credit card.
#3 Plan your Emergency Fund
I would love to take a poll one day and determine how many people in the world actually have an emergency fund. To my surprise, the younger generation, have this money set to the side for the most part compared to baby boomers and Gen Y and it makes sense. The millennials saw the impacts of the dot com crash, 9/11, the fall of stocks in 2003, & the financial crisis from 2007-2009.
Experiencing those events in a short period of time and seeing the impacts that our families had to go through to survive was enough to realize this country has a money problem.
(Read my blog on Ways to Save for an Emergency Fund.)
If you are interested in reducing the temptation or just the reduction in prescreening credit card offers, check out the FTC's website to have your information opt out at www.optoutprescreen.com or you may call 1-888-5-OPT-OUT (1-888-567-8688).
If you happen to be in debt and are looking for strategies to get out faster, then I want to help you and recommend you take my course "4 Ways to Payoff Debt". I have 98 students currently enrolled in the course seeking similar solutions to help them. Use promo code: DOLLAROTTER10 to take the course at half off price of $10 instead of $20. Udemy won't allow me to charge less than this otherwise I would provide. Here is the link or (https://www.udemy.com/4-ways-to-more-money/learn/v4/overview).