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Is Your Credit Card a Perk or a Crutch?

Family Finance and Budget By Michelle P. Sharrow, MBA - We are only weeks away from the implementation of new changes under the Credit Card Act.

Beginning on August 22nd, credit card issuers will no longer be able to charge customers inactivity fees for not using their credit cards. They also won't be able to assess a late payment higher than the amount of the missed payment. While these are some amazing and long overdue changes that will benefit all Americans who hold credit cards, we should go beyond seeing this as an opportunity to get these big money hungry companies back in line. What we should do is look at the overarching reason why we use credit cards to begin with and then consider whether every time we swipe, it is for that reason and not out of convenience for convenience sake or pure greed.

I have two credit cards: one major and one store card. The latter of which I obtained in the past year to take advantage of a zero interest promotion. Since then, I have used the card on at least three other occasions out of pure convenience, not necessity. This led me to think about the numerous consumers who just like me may have intended to use a card only once, but somehow managed to use it on a regular basis. A practice welcomed by the card issuer, it is not a good one for the budget savvy. Realizing this, as of today, I am removing this card from my wallet, reducing the temptation to use it.

I realize that credit cards come with a lot of perks. They are excellent for unanticipated expenses or to earn miles and other benefits from a rewards program. And if you are using them responsibly and solely for that, kudos to you!! But if you are not, and you have more than one -- you should really stop using them immediately. Choose one to keep (you only need one for emergencies). Take that one and put it away. Only pull it out when necessary. The others… shred them.

Though enticing you may feel the urge to call the companies and close the accounts, but please refrain from doing that. Such an impulse and drastic action will kill your credit score. Credit scores are based on the number of credit cards or outstanding accounts that you have, the balance to available credit ratio, and the length of time that the accounts have been opened.

Another benefit of the Credit Card Act is the new streamlined billing statements. These statements are cleaner looking, easier to read and understand. They go a step further by telling you exactly how long it will take you to pay off a credit card by making only the minimum payment. Additionally, it tells you how much you can pay to reach a zero balance in three years. Use this extra information to jumpstart or renew your game plan for getting out of debt. Take it a step further by adding a few dollars beyond that amount to save even more in interest.

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About the Author

Michelle P. Sharrow, MBA is a seasoned freelance writer specializing in personal finance. Based in Waldorf, Maryland, she holds a Masters Degree with a concentration in Finance. Michelle provides a monthly column on ways to help families maintain their finances and stick to a budget titled, Budgeting and Savings for Families. Visit her website at http://www.MichelleSharrow.com.

About The Author

Michelle P. Sharrow, MBA - Family Finance

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