Eternal Spiral Books

Money Matters Questions: Credit Cards

Q. I’ve finally learned my lesson when it comes to credit cards. After charging up four credit card accounts and spending four years paying them off, I don’t ever want to see my name on another credit card again. In fact, I want to cut all of them up and close all my accounts. However, my friend says that I should keep the accounts open and keep one card just in case of emergencies. Which one of us is right? And won’t a debit card work just as well?

A. Congratulations on paying off your credit card debt and being so determined never to get in that kind of position again. We are glad that you have found strategies that work well for you to help you manage your money.

However, your friend does have a good point about your credit cards, for a number of reasons.

*Your credit score and credit to debt ratio.
You credit score is in part determined by how much credit you are permitted by financial institutions. If you close all your accounts, you could be lowering your credit score. Therefore, now that your cards are paid off, keep the accounts open, but put the cards in a safe place where you will not be tempted to use them, except in the most dire emergency.

Keep one available with a low interest rate and possibly cash back points and only use if for essentials and items you could not readily pay for in cash, such as online shopping. The key for using a credit card is never to charge more in a month than you can pay off at the end of the month.

*Rewards cards
Some rewards are worth having, such as free airline miles for purchases, but only if you are a great traveller. Otherwise, go for the cash back. Just be aware that studies have recently shown that people who use rewards based cards tend to spend 4% more each time they use it than cards that do not carry such perks. So make your shopping list and stick to it.

*Insurance Coverage
Also remember that charging certain items on a major credit card can confer some extra benefits. For example, car rental liability insurance is offered by some major credit card companies. If your card has this coverage, you don’t need to pay the incredibly high fees for the “loss and damage waiver” car rental companies try to charge you when you rent a car.

Insurance coverage for baggage lost when you fly is also available, depending on the credit card you choose. In fact, some credit card companies offering this insurance actually cover in addition to what the airline will pay you for lost bags. This baggage coverage is no cost on some credit cards and is well worth having. Travel insurance is also included, so that you would not lose the whole cost of the flight, and would just need to pay a ticket change fee of about $50 to $100 if an emergency cropped up. If the flight is a long-haul one, this insurance coverage is worth having.

*Consumer Protection
Price protection for items you purchase that drop in price after you buy them is offered by some companies. Stores must allow a 30 day ‘cooling off’ period with an unconditional money-back guarantee. They should honor any price differences and refund the money within 30 days. Some major credit card companies allow up to 60 days and will refund you such price differences.

*Fraud Protection
A debit card will not usually confer all of these perks. And indeed, the major difference is the most crucial one: You liability with credit cards in the event of identity theft or fraud will be zero or much lower with a credit card than with a debit card. With a credit card, if you suspect anything fraudulent, you have up to 90 days to report it. With a debit card, you need to report it within 2 business days. Otherwise, you will be liable.

If you do not look at your online banking account that often, or you are overseas, for example, this can be a major financial disaster. Therefore, use your debit card only sparingly for online purchases, and use a credit card instead because of all the extras it offers. Then pay off the bill at the end of each month.

*Determine Your Benefits and Weigh Risks Versus Rewards

One final suggestion is to take time to read all the fine print on a credit card application to determine what special privileges and perks you get with your card, or call customer service and ask. Then choose to use the card that gives you the most benefits in terms of cash back, benefits, insurance, and other perks.

Credit cards do not have to be a disaster and can indeed improve your credit score and even help you save money if you care cautious and learn how to use them to your advantage financially.

For more information on how to improve your family finances, see Emergency Fund 101: How to Save Money for Unexpected Expenses, Your Recession Survival Guide, and A Beginner’s Guide to Buying Life Insurance

Success Strategies for Saving Money at the Holidays

The best way to save money at the holidays is to be honest with yourself and others about what you can and can’t afford. Don’t burden yourself with debt, or feel guilty if you don’t have much or indeed any money for the holidays.

The holidays seem to be synonymous with gifts, parties, food and alcohol. But not that long ago in England, the Christmas stockings hung from the mantelpiece by the fire were considered stuffed to the brim if there was an orange and a sixpence in them (about a dime).

We are not sure how things have become so commercialized in the past few decades, but with the current economic recession still biting hard, this year is the right time to get back to basics. For example, do you really need to buy a gift for everyone in the family? Or more than one gift per person. Is quality important, or quantity?

Each family will have to decide these things for themselves, but it is important to ask the question. If you have a large family, can you do a Secret Santa in order to just gift to one? Or can all the adults agree that Christmas this year will just be for the children, and that they get to ask for a list of three things and Santa will be bringing them one as a surprise?

You can create a lot of family fun without having to spend a lot on food and alcohol. If you do want to indulge yourself by going out for a meal or drinks, don’t starve yourself all day in preparation for a feast. Also don’t buy a lot of expensive and watered down drinks. Your friends might consider taking turns hosting and getting in cases of beer from the warehouse club, or larger bottles of wine. In many cases the whole bottle will be cheaper than what you are paying for one glass of wine in a restaurant.

Have a potluck holiday supper in which everyone brings a dish, or you assign people appetizer, main course, sides and so on. You can provide all the cutlery and drinks or have everything bring a bottle or six pack and you provide the tableware, glasses and desserts.

Make do with the decorations you already have, or get some free resources online and use crayons, colored pencils and whatever else you already have in the house to make your own decorations with the children. Spend time using the toys that the kids got last year for the holidays and probably have not played with since.

In fact, one great way to spend early December planning for the holidays is to take the time to start clearing out things in your house and especially in each child’s room and start gathering all the things that you and the children don’t use or have outgrown.

If they are decent quality, put them on sale at eBay or donate them to the Salvation Army and be sure to get a receipt. Then look on their website to calculate the values for the items and deduct those amounts from your taxes next April.

Use the money you earn on eBay or the money you save on your taxes as the foundation for next year’s Christmas savings account. Don’t feel pressured to spend what you don’t have. Practice saying, “I can’t afford it,” or “If we want it, we have to save up for it.”

Also be sure to revise your Christmas list in light of what you find as you do your holiday cleaning and sorting. You may find yourself crossing a lot of items off the list.

Try to stick to practical gifts for your loved ones, such as attractive items that double as school supplies, for instance, can make great stocking stuffers. Clothes, shoes, boots, a new back pack and so on also make excellent gifts, especially if they are at the right price and your child did not get very many new back to school supplies.

As for re-gifting, we are all in favor of it provided it is not fruitcake. But seriously, if you have no use for it, by all means pass it on to someone who will appreciate it, so long as no one will find out or expect you to use or wear the item you were gifted. Also consider if it is genuinely that person’s taste or not. Re-gifting can help fill in blanks in your list, and it can also enable you to give a gift to someone you would like to be able to give one to, but might not have in the budget.

Everyone has different perspectives on Christmas and what they wish to spend versus what they can afford. If your gap has widened this year, be honest about it and focus on all the fun and free ways you can celebrate the holidays. The new found financial freedom you start creating for yourself and your family will be well worth it and the best gift you can give to your children.

For more top tips on how to save money at the holidays, see How to Save Money this Holiday Season

How to Save Money This Holiday Season

by Annabelle Stevens and Carolyn Stone

It can be difficult to save money throughout the year, but it can seem almost impossible once the holiday season begins to draw near. In this guide to smart holiday planning and spending, you will learn how to create a holiday budget that does not derail your household finances.

Discover the best way to get organized through setting priorities on spending, gifts, entertainment and more. Learn how to budget for the things that are important to you, and when to say no.

You will also find guidance on ways to have the all-important conversations with your family about how to spend the holidays, and what to spend your holiday budget on. In this way, you can stick to your time budget as well as financial budget, reduce stress, and plan for success this holiday season.

If your blood pressure rises every time you even think about the Christmas and other end of year holidays and how you are going to afford to pay for them, download this guide today and get started planning your best holidays yet without breaking the bank.

Word Count=9,990

TABLE OF CONTENTS
INTRODUCTION
CHAPTER 1: GETTING STARTED WITH YOUR HOLIDAY BUDGET
CHAPTER 2: MANAGING EXPECTATIONS AROUND THE HOLIDAYS TO AVOID STRESS AND DISAPPOINTMENT
CHAPTER 3: FINALIZING YOUR HOLIDAY BUDGET
CHAPTER 4: HOW TO SAVE MONEY THIS HOLIDAY SEASON
CONCLUSION
APPENDIX

ABOUT THE AUTHORS

Annabelle Stevens and Carolyn Stone are two of the main writers and editors for the popular website insidersecretscorp.com, and the authors of over two dozen finance and self-help guides.

Buy Now: How to Save Money this Holiday Season (More for Less Guides)