Makeover Monday: A Moneywise Post

It's no secret that I believe the path to fitness is based on mindfulness and self-control. For many of us on the heavier side, absence of those two elements in our lives frequently carries over into non-fitness areas: clutter, organization, finance, etc., and that's why I include these topics in this Makeover Monday feature. Feel free to move along if the non-fitness topics don't interest you. It won't hurt my feelings at all. :)

A hundred (or so) years ago when I applied for my first credit card, I said a silent prayer for acceptance as I turned in the application. Back then, approval for credit was a very iffy thing. You had to be credit-worthy to get credit. Nowadays, of course, everyone who has red blood can (and usually does) get a credit card and (in the U.S., anyway) as early in life as possible.

I was very fortunate in having parents who used credit cards wisely and taught me how to do the same. I've also seen more fortune in that I've never lost a job or had a medical emergency or anything that would push my finances to the limit. Not everyone was so lucky, though, and many, many folks are now deep in debt doodoo and sinking fast. In the current U.S. economy, bankruptcies have increased 39% since last year. Almost everyone knows someone who has either filed for bankruptcy or is very, very close. These are stressful times for hundreds of thousands, if not millions, of people.

For many of us who are trying to find our way to a healthier life, stress in one area of our lives often leads to unhealthy eating or a general sense of inertia. If debt or credit card pressures are driving you to overeat or make unwise choices, I hope the following tips prove helpful, and if you have any tips not listed, sing out! I'm no personal finance expert. I'm merely sharing what I've been taught over the years.

Possibly Useful Tips for Controlling Your Credit Card Usage
- It should go without saying that you should make your payments on time. Failing to do so can affect your credit report and the current interest rates you are paying, not just on one account but all accounts.
- Pay more than the minimum payment, even if it's just a few dollars more. It's that whole energy creates energy psychology. As you see your balance dwindle, you'll build a healthy momentum in paying it down completely.
- Shop for the best rate. While it's better to pay off credit card balances each month, that's not always possible. If you suspect you'll be carrying a balance on your account, make sure you shop for the best rates and terms. Check out this link to a handy matrix for choosing a credit card.
- For your current account, call the customer service number (should be on your credit card statement) and tell them that while you have been a satisfied customer, you have seen several offers for cards with lower interest rates and no annual fee. If you have a good payment record, they might just agree. It never hurts to ask!
- Don't fall for enticing introductory rates without reading the fine print (terms and conditions.) These rates are most likely for a limited time only and will shoot sky-high when the period is up.
- Review your statement religiously and notify the credit company immediately if you spot any suspicious charges. My credit card company (Chase) offers an online method for checking up on current charges, and it has proved to be invaluable. Two "companies" keep hitting me with small charges (less than $5.00) that I never authorize--they're counting on me skipping over the small amount--and I can notify Chase immediately of the problem. It's resolved before my statement is ever issued.
- Keep track of your credit card spending and be aware of your credit card limit. Credit card companies make a lot of money on late fees and over-the-limit fees. In addition, they can raise your interest rate if you exceed your limit. A good guideline is to stay under 50% of your credit limit.
- Limit the number of cards you have. I have one credit card and one debit card, which makes monitoring usage much easier.
- Work with your creditor(s) when you have problems. They want to keep your business and will often work with you by cancelling fees or charges, especially if your account is in good standing and your payment history is satisfactory.
- Avoid taking out cash advances, as the fees associated with these withdrawals are excessively high.
- Unless you're able to pay off your account each month, don't use your credit card just because you get "reward points" for it. You're better off in the long run using cash or your debit card.
- To cancel a card, cut it up and send it to the issuer with a letter asking that they notify the credit bureaus that the card is being canceled "at the customer's request." Keep a copy of the letter for your file.
- Check your credit report annually. By law, you're entitled to one free report each year. Go to Annual Credit Report to start the process. Mistakes in your report can lead to a lower credit score, higher interest rates, issues with employment or housing, or fraud. Report any problems to the credit bureaus. If I'm not mistaken, you can report the problems online.

Credit cards are not evil, in and of themselves. They're useful for building a payment history, which shows your ability to manage credit and pay your bills on time. A good payment history makes it easier to get a mortgage loan. Also, credit cards are often required to guarantee a hotel room or rent a car, not to mention paying for truly necessary, and unexpected, expenses such as an emergency room visit. But the cards should be used wisely, and not as a way of living beyond what your income will support.

Two brilliant (IMO) documentaries about America and its love affair with the credit card:
Maxed Out and In Debt We Trust.

I hope you found any of this useful, but more than that, I hope that if you're one of those struggling with consumer debt, that you're able to gain control of it and work on developing a healthier financial life to go along with your new, fitter self.


image credit: b.franchina via flickr