One of the simplest ways to improve your positive cash flow is to reduce the money going towards the repayment of personal debt. One of the most common forms of debt we carry is credit card balances, paying these balances off and controlling our use of the cards can increase our monthly income.
To see the benefit of paying down your cards and eliminating the payment simply add up the monthly payments of all the cards, major cards, gas cards, and store cards you carry balance on and put that money towards your income. How much money are you missing out on?
If the increase in income isn’t enough incentive take a look at your statement, look at the interest rate you are paying, and see how little is going towards principal and how much is being put towards finance charges (interest). Realizing that it will take several years of minimum payments to pay for last year’s weekend vacation should start you thinking.
The best way to use credit cards is to control the way they are used:
1) Pay balances off as quickly as possible, if it has to be carried set a
target date and stick to it.
2) If you currently have balances start paying them down. Start with the card with the highest rate, pay as much as you can until it is gone, then move to the next.
3) Look for card with low interest rates and transfer balances. Understand the terms before you commit. How long will the rate last what will it reset at, and what are the fees?
4) See if your current card will lower your rate. Will they match the competition?
5) Do not be late with payments. Many cards will increase interest rates substantially if you are late with a payment. Pay on time.
6) Don’t charge it if you can’t afford it. If you are using a card to facilitate a purchase, fine. If you are using a card to purchase something you cannot afford but will allow you to own with small payments forever and a day, don’t do it.
Eliminating your existing debt and rethinking the way you use your credit cards before you retire should be a priority strategy towards strengthening your financial position.
