Credit Card Mastery

Brad Michael
Mastering your credit cards is something anyone can do, when THEY DECIDED to do it. 
If that is you this article will give you the foundation & understanding you need 
to Master your credit cards.

Learning a few simple, fundamental rules can help you save money when it comes 
to your credit cards.

Credit cards are very useful tools but must be handled with care and precision. 
Credit cards are not a necessity but certainly are handy when it comes to 
transacting business with any retail or online business.

There are literally thousands of credit card companies and they all have 
a selling point. All of these businesses want you as their customer and 
with so many competitors, there are many attractive deals that can actually 
put money in your pocket if you know what your are doing.

Credit cards are instruments that are offered to consumers with average 
to excellent credit from banks and other financial institutions. These 
institutions rely on consumers making purchases with their credit cards 
and then pay a portion  of their balance at the end of each billing cycle. 

These minimum payments are figured as a small percentage of the outstanding 
balance. This balance is a loan to you from the institution which has issued 
your card. Credit card companies charge interest on these loan balances that 
are not paid in full during the 30 day billing cycle.

These interest rates are higher than a normal bank loan because a credit 
card loan is unsecured (there is no collateral backing the loan) and because 
financial institutions lose money on a larger percentage of credit card 
customers when they default on their balances.  Because of these losses, 
good paying customers are forced to pay more.

Just like many things in life; it’s not fair but that’s the way it is. When 
banks take on accounts that have risk, more loss will be involved. Because banks 
have shareholders who expect to be paid well, banks charge higher interest rates 
to make up for the losses incurred.

Credit card companies make billions of dollars a year on consumers who don’t 
pay their credit card balances in full each month. These are good paying customers 
who elect to pay the minimum balance on their card instead of paying the balance in 
full. There are millions and millions of these good paying customers. When 4 they 
elect to pay the minimum payment they are also electing to pay interest on the 
remaining money still owed.

This is exactly what the credit card company wants you to do. They want you to 
make the minimum payment amount and pay it on time. Let me give you an example:

                                  The Credit Card Interest is what Sneaks Up on You

You have just received your new credit card and you have been thinking of some 
items you want to purchase. You are excited as you stroll down the aisles finding 
your bargains. Knowing you don’t have cash for these purchases, you decide to use 
your credit card to buy everything on your list. It’s more than you can pay in 
full the next month but you know you can make the minimum monthly payment and 
still be in good standing.

A few days go by and you forget all about the charges you’ve made.  The next time 
you think about it is when you go out to the mailbox and you find your bill. You open 
it up and see your credit card balanceof $725.00 from these purchases you made. You 
take a look at your checkbook and see that you only have $500 remaining.

What do you do?

You make the minimum payment of $30.00. You’re relieved and you put it out of your 
mind. What most people fail to realize is that your balance has not decreased by 
$30.00. The balance has only decreased by $18.00 because $12.00 went towards interest.

You go out and purchase a few more items with your credit card and your statement 
comes in 4 weeks later. You notice this time your balance is not $725 but $1,000 
with the same minimum payment of $30.00. You pay the $30.00 but only $13.00 goes 
toward the reduction of your principal, which means $17.00 went towards

The higher your balance the more interest you are going to pay. You do this month 
after month and the vicious cycle continues. If this pattern continues you can see 
that the balance continues to increase for three reasons:

1) You are charging more to your card

2) You are only making the minimum payment, and

3) You are paying less on your balance because you are paying more interest.

As you can see, paying your balance in full every month
is the only way to use a credit card.

By doing this, you can actually make money from the credit card companies. 
Credit card companies will offer you cash incentives to use their card. This 
means they will pay you 1-2% every time you place a charge to your card. This 
percentage, usually labeled “points” can be redeemed for cash or merchandise. 

I like to redeem my points as cash and just apply it to my credit card bill 
thus reducing my credit card balance. So I am winning three ways:

 1) I am not paying interest since I am paying my bill in full each month, and 

2) I am gaining cash by charging on my card, and 

3) I have the convenience of using their money free for 30 days.  

The credit card is a convenience for me and they are paying me to use it. So 
using the card is a benefit to me and I am making money from the credit card 

This scenario is the position you want to be in.

Here are some things you can do To gain the maximum
benefit from your credit cards:
  1. Only charge as much on your card as you can afford to pay in 
    full every month.
  2. ALWAYS pay your card in full every month
  3. Look for a card with a cash back feature
  4. Avoid getting too many credit cards (2 cards should be enough)
  5. Avoid signing up for every credit card at the check out line 
    (“save 20% on your purchase deals”)
  6. If you sign up for these deals and plan to use the card in the 
    future, apply these habits mentioned
  7. Manage your account online and review all statements closely for 
    fraudulent charges
  8. Sign up for fraud text alerts on all credit and debit cards
  9. Schedule your payments to coincide with your paychecks dividing 
    the balance by the number of paychecks you will receive before the 
    payment due date. This will help you spread out your payments making 
    it easier to pay in full before the due date.
Good financial practice doesn’t happen by mistake. You must plan ahead 
and apply good, consistent habits to insure financial success. I wish 
you all the best as you gain control of your credit card spending and 
all of your financial matters.

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