Dec 12, 2011

5 Financial strategies that credit card companies do not want you to know about

For some people saving money is like getting a root canal from a dentist - not much fun, and very painful!

And that's exactly how the banks that offers credit cards like it - the more you use your credit cards, the more money they make. Because the more you use your cards the more likely you are to miss a payment, go over your limit, or simply just start carrying a balance every month. All of which make them money!

So if you are a spender, and you like using your credit cards, it's time to change some of your habits. This will make YOU more money so YOU are the one getting rich, not them. If you need a little help making this change, here are 5 financial strategies that credit card companies don't want you to know about:

1) Use the envelope system for big purchases

Not sure how the envelope system works? It's easy! Just get an envelope - any size or shape will work. On the outside of the envelope you should write down what it is that you want to purchase and how much it costs. And then simply start putting cash in each week until you have enough to buy what you want using cash. But these days it is so easy to use credit cards to but what you want right away -and then worry how to pay for it later. This strategy will keep you out of debt, save you lots in interest, and give you the satisfaction of buying in cash. I know it's no fun waiting to buy something exciting like a big screen LCD television, or a new refrigerator. But once you do it you'll enjoy handing over a big pile of cash!

2) Don't pay full retail price!

There are several ways to avoid paying full retail price. And new popular items usually can't be bought at a discount. But for many retail items you can save lots of money if you take the time to use one or more of these strategies. If you like to buy in a store, you can usually find coupons in your local newspaper. Or you can sign up for the store's newsletter, which often contains coupons or notifies you of discounts. If you like shopping online, you can usually find coupon codes that will give you either a discount or free shipping. And finally, if it's an item that is available in several different stores, do some comparison shopping to find the lowest price.

3) Buy used whenever possible

I know there are nothing like buying something new, opening the box, and seeing a bright, shiny product for the first time. We all like that feeling! But if money is tight you can usually find used products that are in great shape, and save up to 50% or more. I've found exercise equipment, sporting goods, appliances, and furniture by using Craigslist. You can also find great deals on brand name clothing in consignment shops - but I'm not a big clothes shopper so I don't do that often. When shopping on Craigslist I don't usually buy an item unless I can see a picture and ask a few questions before I hop in the car and start driving. But you can save LOTS of money buying used stuff!

4) Put away all your credit cards except for one

If you use your credit cards too often and debt is starting to pile up, this money saving strategy is a must! Why keep only one credit card? So you can use it for emergencies. Not for shopping sprees. There is no quicker way to get yourself into financial trouble than to start using your credit cards on a regular basis. Once you start carrying a balance, then the interest rates start building and building - and before you know it, you're struggling with debt! So one of the best lessons you can learn is that credit cards are NOT the same as cash (unless you really do have enough cash and you just want to use the cards for convenience, store discounts, or rewards).

5) Pay yourself first

Okay, this sounds really boring and silly to some people. But it is the best way to put away money over time - and time is your best friend for growing a large nest egg! Whether you put money in a jar, an envelope, a safe deposit box, a savings account, or an investment fund, do this first - then you can use the rest for living expenses. Even if you can only afford to put away $25 each paycheck, before long your savings will grow into something substantial. It would be even better if you can put in more. The key is to save money first so you are not tempted to use it. Don't worry so much about the interest rate. And it's alright if you don't know much about investing. Drive down to your local bank, open up a separate account, and have money put into it automatically from your savings account, checking account, or paycheck. And watch your money grow!

Sure, it would be real nice to win the lottery and not have to worry about money. But that's not a way to get rich. And it is certainly not a way to save money. Using these tips you'll be on your way to a more frugal lifestyle!


Kris Bickell offers tips for saving money, repairing your credit problems, and getting out of debt faster. Learn how you can get control of your finances and become debt free.

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