Posted August 12, 2021 by Mark Perna
Episode Title: Playing Smart with Credit Cards
The danger of college debt gets a lot of attention, but what about your credit card balance? Here’s how to play smarter with credit cards, coming up next on The Perna Syndicate.
Ep 264 show:
Greetings and welcome to The Perna Syndicate! As we talk about money this week, there’s an elephant in the room. It’s not college debt, big as that is. It’s not your retirement contributions or rent or how often you buy a fancy coffee. The elephant in the room is credit card debt.
The trick to avoiding a big balance is to use your credit card like a debit card. You don’t use it without the money already sitting in the bank—period. If you pay your credit card in full each statement cycle, you won’t pay interest.
Ryan McPherson of SmartPath says that it’s surprisingly easy for a 2 to 3,000-thousand-dollar credit card balance to become a 6 to 9,000-thousand-dollar problem. Compounding interest (which works wonders with investments) becomes your enemy with credit card balances.
If that’s the case, why not just use a debit card? You can, and some people do. But credit cards help you to build credit and may also offer other perks like travel and reward points. Many cards allow you to convert the points into cash rewards…so you get paid instead of paying the credit card company. Not a bad system!
But of course, you have to be smart about it. If you get sucked into the notion that just because you have a card, you can spend up to the limit, you’ll probably lose out. The credit card companies are everywhere, promising you that their card is the gateway to the life you want to enjoy. They’re smart. You just have to be smarter.
If you use your credit card like a debit card and pay that balance in full each month, they’ll be the ones paying you. Sounds like a win to me.
On tomorrow’s show, we’re going to talk about planning financially for the unplannable events of life. See you back here then on The Perna Syndicate.