In my opinion, only one credit is needed to maintain a healthy budgeting plan.  While department store credit cards are easy to get, if you have at least one major credit card (i.e. Visa or MasterCard), handling one piece of credit card debt is more than enough when trying to keep track of your monthly spending.  Department Store credit card interest rates are much higher than major credit cards and can range anywhere from 18% – 25%. Also, the late fees are approximately $35.  Additionally, keeping up with credit card annual fees can add up quickly for those using three of more credit cards.  The average annual fee is $135/year.

It is important that you read the fine print of your credit card agreement.  While zero-percent interest “transfer balance” offers sound great, often times the zero-percent offer will be voided if you make one late payment.

Here are a few tricks & tips you should know about credit cards:

  • Transaction Fees – You may have read there is a 5% transaction fee for cash advances; however, what out for the $10 minimum charge.  Therefore, that $100 cash advance can cost you 10% (i.e. $10 on a $100 withdrawal).
  • Annual Fees – Find a credit card with NO ANNUAL FEE.  If you currently have a credit card and your a paying a yearly fee, either find one that has no fees or try and negotiate with the bank to have it waived.
  • Foreign Transaction Fees – Call your bank and verify the travel fees when going out of the country.  Often times you can be charged two fees for one transaction and you can find that a $50 purchases cost you a lot more.
  • Late Payment Fees – We all have been there where we forgot to mail our bills and decide to make the payment over the phone to avoid that $39 late fee only to realize there is a $10 “over-the-phone” fee.  Often times, you can call the bank and they will waive a one-time late fee.
  • Over-the-Limit Fees – It is very important to check your balance often on a credit card that you use regularly to make sure you do not go over your limit.  The over-the-limit fees on average will cost you $40.
  • Finance Charge – The best way to avoid a finance/interest fee is to not carry a balance month-over-month ((i.e. if you charge $150 during the month – pay it i full when you get your statement) However, another way to reduce finance charges is to Pay the MAXIMUM and not the MINIMUM.  For instance, if your minimum payment due is $20, and your finance charge is $15, you are only paying $5 towards your balance.  If you continue to pay the minimum, it can take years to pay your balance off. ALWAYS try to pay more than the minimum amount due.
  • Zero-Percent (Transfer Balance) Offers – If you have a large balance on your credit card and you are paying close to $100 a month in finance charges, it is time to look for a zero-percent transfer balance offer. READ THE FINE PRINT!  While these offers sound really great, some of the stipulations can put you in a financial position worse than were you were.  For instance, if you are late, the interest rate will apply, which could be more than your old credit card.  The “no annual fee” may only be for the first year.
  • Cash Advance Fees * – While cash advances are an easy way to get cash quick when you need it, you can end up being charges twice for that impulsive decision.  (i.e. cash-advance fees and finance charges). I had to circle back on cash advances because they are the worse option in the world for easy access to money when trying to stick to a budget.

The best way to get out of credit card debt is to NOT get into credit card debt in the first place.  Charge ONLY what you can afford to pay off in the given month.  Keeping a zero balance will eliminate any fees that are applied to credit card balances.  Make your payment on time and BEFORE the due date.  When using your credit card, WRITE down your expenses somewhere (i.e. check register) to keep track of your spending.  DO NOT get a cash advance on your credit card.  Develop a form of discipline and good budgeting habits to avoid this situation – The cost is too great. Lastly, do not use your credit card when you are out of the county. The best way to control your spending is to use cash and/or travelers checks.