How to pay off your credit card - beat the system that enslaves you

JawZ · Post by **JawZ** » Wed Feb 04, 2009 11:10 am

http://www.ncnblog.com/2008/08/29/calcu ... readsheet/

Ok, I have already done this and am debt free.

For example, instead of paying $50 a month on the due date (example: $50 on the 25th of the month), pay the $50 as soon as you can (example: $50 on the 5th of the month). An alternative is to pay $25 twice a month, each before the due date. Or you could divide it up any way you want, so long as you pay the minimum before the due date. By employing these methods, you are in effect forcing the credit card company to recalculate the interest (daily interest) on your account. Each day it's compounded. So by paying the same amount of money...but paying it earlier in your billing cycle, you are paying much less interest overall.

So by simply paying early and more often, you are paying less interest on the account.

The above link has an excel spreadsheet which you can use to figure your savings. Just plug in the numbers.

Hope this helps.

Sava700 · Post by **Sava700** » Wed Feb 04, 2009 11:12 am

I just don't use a credit card

Roody · Post by **Roody** » Wed Feb 04, 2009 11:18 am

Sava700 wrote:I just don't use a credit card

That's a smart way to go.

Suckers can be the kiss of death that's for sure.

Sava700 · Post by **Sava700** » Wed Feb 04, 2009 11:20 am

Roody wrote:That's a smart way to go.

Suckers can be the kiss of death that's for sure.

I have two but for emergencies only or large purchases that I know I have the funds to pay off as soon as the bill arrives. It helps credit scores when you use it like that.

JawZ · Post by **JawZ** » Wed Feb 04, 2009 11:20 am

Sava700 wrote:I just don't use a credit card

That's because you are too stupid to figure out which way the magnetic strip goes. I'd tell you the correct orientation was up your ass but there aint no way that would fit in there because you got your head stuck in it.

Sava700 · Post by **Sava700** » Wed Feb 04, 2009 11:21 am

UOD wrote:That's because you are too stupid to figure out which way the magnetic strip goes. I'd tell you the correct orientation was up your ass but there aint no way that would fit in there because you got your head stuck in it.

Post by **Philip** » Wed Feb 04, 2009 11:30 am

I am debt free as far as credit cards are concerned... Now houses, that's another story, lol.

I do use a credit card or two for the 1-3% cashback rewards, I just pay the balance each month.

It's often hard for people with low income and immediate necessary expenses to stay out of credit card debt though. I had over $20k balance at one point while I was in college, I slowly paid it off over time.

Prey521 · Post by **Prey521** » Wed Feb 04, 2009 11:39 am

I turned down a corporate credit card and have one that I use just for business purchases so that I can reap the rewards and not my company.

I had crazy dept till I was about 27. Then I started paying off my smallest CC's first and worked my way up to the biggest balance. A trick I learned from a friend.

loop2kil · Post by **loop2kil** » Wed Feb 04, 2009 6:57 pm

would this same logic work to pay off your mortgage any faster??

downhill · Post by **downhill** » Wed Feb 04, 2009 9:34 pm

Anytime you pay extra on your mortage is a good thing. I took a 15 year mortage down to 11 years by paying extra if I keep paying an exta $110 a month. Seven more years.

If you have a 30 year mortage, you can really save a lot of interest by paying extra.

I only use a credit card when I have the cash to pay in full. I've rarely had a card debt.

mountainman · Post by **mountainman** » Wed Feb 04, 2009 9:48 pm

The only time I don't use a credit card is if it's not accepted at all. I carry VISA, Discover and AMEX to make sure all the bases are covered. For each of those I get rewards of either cash back, miles or points. I pay it off at the end of the month 100%.

Having a credit card isn't a "kiss of death". Living above your means and buying more than you can afford is.

If you have any self control with plastic, take advantage of the rewards programs. Hell, I got free tix to Puerto Rico, free night at the InterContinental Resort in San Juan and a $100 gift card to Ruth's Chris all from rewards that I'll be using next month.

I think it's the closest I'll get to owning a money tree.

ub3r_n00b · Post by **ub3r_n00b** » Wed Feb 04, 2009 10:37 pm

Sava700 wrote:I just don't use a credit card

eventually, unless you are super rich, you are going to need a good credit record and a credit card, if managed properly, is the best way to go to start off.

Best thing is to use it as a debit card, and once you get home, pay off whatever you spent right away via online banking.

Sava700 · Post by **Sava700** » Wed Feb 04, 2009 11:01 pm

ub3r_n00b wrote:eventually, unless you are super rich, you are going to need a good credit record and a credit card, if managed properly, is the best way to go to start off.

Best thing is to use it as a debit card, and once you get home, pay off whatever you spent right away via online banking.

I came back and stated that I've got two cards but for emergency purposes and the sometimes big purchases I already have funds for to pay off as soon as the bill comes to up that credit score..but yes managed properly as in money management will help but most people can't manage money...my wife is horrible about it.

bilbus · Post by **bilbus** » Wed Feb 04, 2009 11:53 pm

Using a credit card for points, or to build credit score is not worth it.

If you have a problem with debt dont use one. If you need emergency cash, build up a emergency fun that sits in the bank.

If you need cash for large buys, save up and buy it when you have the cash.

You dont need to use a credit card to build credit .. just pay your bills and you will be fine

mountainman · Post by **mountainman** » Wed Feb 04, 2009 11:55 pm

bilbus wrote:Using a credit card for points, or to build credit score is not worth it.

If you have a problem with debt dont use one. If you need emergency cash, build up a emergency fun that sits in the bank.

If you need cash for large buys, save up and buy it when you have the cash.

You dont need to use a credit card to build credit .. just pay your bills and you will be fine

Yeah, thanks for the financial advice.

JawZ · Post by **JawZ** » Thu Feb 05, 2009 12:02 am

Two things....

This thread wasn't necessarily about the merits of credit cards, etc. It was made to help those that have them and want to pay them off earlier while saving themselves some money.

Secondly, my credit score went DOWN because I paid off all my debt. It's because I'm no longer a slave to their system. When I was in debt, I used to get credit card offers once a day in the mail...now, my mailbox is empty most days.

So how does being debt free equate to being a credit risk?

Wake up people!!!!

Humboldt · Post by **Humboldt** » Thu Feb 05, 2009 12:02 am

bilbus wrote:Using a credit card for points, or to build credit score is not worth it.

Not worth it how?
I agree the can be dangerous, but with some of the common sense that's been pointed out they can also be useful.

I'm about to cash a $500 reward that's built up over the past couple years. I might've been able to save that up in the same time frame, sure but...I didn't, and having it coming to me now is damn nice.

From what I've heard there are other ways to build a credit score but credit cards work as well, are convenient, and in the case of renting a car or hotel room reservations completed needed.

aagiants · Post by **aagiants** » Thu Feb 05, 2009 12:27 am

UOD wrote:
Secondly, my credit score went DOWN because I paid off all my debt. It's because I'm no longer a slave to their system. When I was in debt, I used to get credit card offers once a day in the mail...now, my mailbox is empty most days.

So how does being debt free equate to being a credit risk?

Wake up people!!!!

^^ That doesn't make sense. I work for a credit card company (I AM THE SYSTEM) and now offers aren't being mailed out due to the economy. We are limiting our assets to decrease losses. Lowering your debt increases your credit score as it shows that you are not in need of debt.

But i agree w. ur earlier statements... If you are low on funds Pay off your bills ASAP while also building an emergency fund.. No point to pay off ur CC to only be broke again- Mail 5$ if you have to- If you have free billpay from ur bank send a check everyday if you have to it makes a difference.

bilbus · Post by **bilbus** » Thu Feb 05, 2009 1:52 am

I bet he closed his credit card accounts .. that will lower your score (your advailable credit will go down)

If you use credit cards, you will spend 15% more then if you use cash. People are more likely to buy something on credit, then handing over cash. This is acording to a Dunn and Bradstreet study.

Rainbow · Post by **Rainbow** » Thu Feb 05, 2009 9:10 am

Anyway back ON TOPIC thanks for the great link. I'm not as perfect as everyone else and I do have credit card debt. I never knew this

Thanks!!!

Post by **YeOldeStonecat** » Thu Feb 05, 2009 9:18 am

When younger and your credit is not that great, sparingly use the "easy to get" high interest rate cards to build a credit score a little. Once you can get a good credit card, such as one through a local credit union, with a 10.something or 11.something finance charge, that's where you savings are.

Continuing to use those crummy "credit for everyone" high interest rate cards like the "You're approved" Capitol One junkmail you get 3 times a week in your mail..those are the ones that are an uphill battle to pay off.

When you run a 5,000 or 10,000 monthly balance on your credit card..the difference in your credit cards finance charge is HUGE when comparing at 18.5% junk credit card, versus a nice little 10.5% card through your local CU.

The above spreadsheet works on your first month of a balance..but once you carry over a balance to the next month, that pocket change of savings diminishes quite a bit.

Post by **Philip** » Thu Feb 05, 2009 10:06 am

loop2kil wrote:would this same logic work to pay off your mortgage any faster??

With mortgages (from what I've seen), they change your principal balance once a month, not when they receive the payment. Some companies offer biweekly payment option... The catch is that often there is also a $5 or so charge associated with it. It ends up helping to pay off the principal a bit faster, however there is another gimmick: Monthly payments are 12 in a year, biweekly are 26 payments (not 24). So the actual result is you pay it off faster because of the extra payments, not necessarily the shorter periods. You may be better off just sending a bit extra principal when you can, it adds up quite a bit, especially if it's in the first years.

JawZ · Post by **JawZ** » Thu Feb 05, 2009 10:39 am

Another issue which should be noted is that in this day and age, credit scores and reports are very much a part of the hiring process by many employers/companies.

So being debt free could actually disqualify me from a job. Unlikely, but possible.

Post by **YeOldeStonecat** » Thu Feb 05, 2009 10:46 am

UOD wrote:Another issue which should be noted is that in this day and age, credit scores and reports are very much a part of the hiring process by many employers/companies.

So being debt free could actually disqualify me from a job. Unlikely, but possible.

Agreed.....years ago I never really cared about credit score. Mine was always fine, but I never paid attention to it, it seemed that applying for a mortage or something..as long as you didn't have bad marks against your credit, you were OK, much of the approval process was based on your debt to income ratio, etc.

But now-a-days...it seems your credit score is very important, it can even determine what interest rate you get. Having a decent credit score is OK, but having a top notch one is even better, you get a lower interest rate. For mortgages, even car loans.

So, applying for a mortage or car loan, having a top notch credit score is desirable.

How do you get a top notch credit score? Gotta have "credit" for a period of time. So in this instance, it appears to help you if you have a credit card with a decent amount of credit on it.

In my experience, having a huge balance on your credit card doesn't hurt your credit score.

Post by **Philip** » Thu Feb 05, 2009 12:08 pm

My wife works hard on "improving" my credit score, especially before Christmas.

Sava700 · Post by **Sava700** » Thu Feb 05, 2009 12:20 pm

Philip wrote:My wife works hard on "improving" my credit score, especially before Christmas.

Mine works so hard all year long so I took her tool away and destroyed it!

Post by **YeOldeStonecat** » Thu Feb 05, 2009 12:25 pm

Philip wrote:My wife works hard on "improving" my credit score, especially before Christmas.

Year round here!

Post by **Philip** » Thu Feb 05, 2009 12:55 pm

Sava700 wrote:Mine works so hard all year long so I took her tool away and destroyed it!

As long as you don't disable yourself it's all good. Sounds scary though, depending on context

Sava700 · Post by **Sava700** » Thu Feb 05, 2009 12:56 pm

Philip wrote:As long as you don't disable yourself it's all good. Sounds scary though, depending on context

as in cut the card up

loop2kil · Post by **loop2kil** » Thu Feb 05, 2009 4:37 pm

UOD wrote:
Secondly, my credit score went DOWN because I paid off all my debt. It's because I'm no longer a slave to their system. When I was in debt, I used to get credit card offers once a day in the mail...now, my mailbox is empty most days.

So how does being debt free equate to being a credit risk?

Wake up people!!!!

Did you close out those accounts completely or just leave them open with a '0' balance? I forget which way is better, but one way or the other it can affect your score having 0 balances or less available debt opportunity.

Post by **Philip** » Thu Feb 05, 2009 4:45 pm

Theoretically, closing cards lowers your available credit, and therefore your credit to debt ratio, which is supposedly worse.

What happened to me recently though is I got a couple of cards with 0 balance closed by the bank just because I hadn't used them for a year :/

JawZ · Post by **JawZ** » Thu Feb 05, 2009 4:47 pm

loop2kil wrote:Did you close out those accounts completely or just leave them open with a '0' balance? I forget which way is better, but one way or the other it can affect your score having 0 balances or less available debt opportunity.

First of all, I don't play along with their scheme. The bottom line is this, becoming debt free and closing accounts should not be reason for a penalty. the fact of the matter is this:

Their formula is designed to find out who is financially unstable and exploit them. Extending credit to people that can't afford it means that those folks MAKE THE BANK MONEY AS THEY WILL ALWAYS BE PAYING THE BANK BACK + INTEREST!!!!!!!!!!!!!!!!

There is nothing good from this. It's a scheme to make money.

Tell you what, go pick up a gun, go down to the bank and tell them you demand to be paid. You'll be in jail shortly thereafter. Meanwhile, these companies hold every American hostage to a system of debt so that they can get paid.

JawZ · Post by **JawZ** » Thu Feb 05, 2009 4:51 pm

Philip wrote:Theoretically, closing cards lowers your available credit, and therefore your credit to debt ratio, which is supposedly worse.

What happened to me recently though is I got a couple of cards with 0 balance closed by the bank just because I hadn't used them for a year :/

why would I loan someone money that has a bunch of open accounts? Oh that's right, because statistically speaking, people who borrow money usually wind up having to borrow more....and then we can extend them more credit which comes at a higher interest rate which makes us more money!!!!!!!!!!!

Credit scores have nothing to do with credit....it's a "who can we make more money off of" score.