Saturday, April 17, 2010

Chaos Break

Yes, every time I thought about my blog for the last two months I could only think about the guilt I felt for not keeping up with it. If you have been reading my blog for a while, its pretty common for me to vanish for a while during this time of year. I will have a hectic summer of studying for my doctoral comprehensive exams, collecting data for my dissertation, and writing my dissertation. It is by no means the end of frugal green girl, but merely a warning that my dropping off the face of the planet is merely temporary.

Anyways, today I would like to start a discussion on credit cards and charge cards. While most people see them as "good" or "bad", I like to encourage you to see them instead as a "tool". When you know what your personal limits are, not what the credit card limit is, that is what is most important. Since the number one rule in personal finance is don't spend more than you bring in, certainly apply that to your use of credit cards and charge cards. Either pay them off each month, or develop a plan that you can pay them off aggressively, since each month will add more money in finance charges. When I say I use them as a "tool", I am referring to the benefits, like reward points and other bonuses you may get from holding either a credit card, charge card, or both. For example, I hold a charge card with Old Navy. It is the only charge card I hold because I basically do all of my clothes shopping either at the Gap or Old Navy, both of which are affiliated stores. Every time I spend $200, something I normally do over time anyways, I earn $10 bucks towards more clothes. In addition, they also have store events where card holders get additional percentage off all items. The important point to note is that I know its something I would do anyways, and I am not getting a charge card for the sake of it, not that I normally shop there.

With credit cards, I would always recommend looking at what your own financial institution has in store for you, because the APR rates are likely to be twice as good as the places where you apply for a credit card to get a "free gift". With the credit card from my financial institution, I earn the "reward points" that you see on many commercials for other cards, and then you can use those points on an online catalog (usually $1 spent = 1 point) with free shipping. I recently got a desperately needed paper shredder, which would normally cost me around $70. Again, if you conserve those points to use on something you really need, and not fun "toys" and things that are not really necessary, you can also save some money.

Also, don't have too many credit cards or charge cards - I only have one of each. The more you have, the easier it is to justify unnecessary purchases and spending. Note as well that each time you apply for a card, a credit check is done, and the more credit checks you have on your record for that time-being, the harder it is to get things, like loans, cars, houses, etc.

When used properly, credit cards and charge cards can work to benefit your finances, keeping in mind the first principle of personal finance: Don't spend more than you bring in.