Credit Card Debts Accumulate Faster Than Savings Account Interests
Many people have at least two credit cards. Some people use their credit cards wisely, while others don’t. You may define responsible credit card usage as paying off debt balance every month and using less than half of the available total credit line. If you already own a savings account fund for retirements and emergencies then you are on the right track. However, if your credit card debt amount is equal to your savings account you’ll see that your credit card debts grow faster than your savings account, because typical credit card debts have higher interest than savings account. If this happens, you are facing a serious financial bleeding that will leave you wither and dry slowly. To fix things immediately, you need to start using your cards responsibly while building a respectable amount of savings account.
First you should get a credit card company that agrees to give you cash back on each purchase (cash rewards). Specifically, choose a card that will give you at least 3 percent cash back. It’s preferable not to open up another line of credit if you don’t have to do so.
Next, you’ll need to find a high-interest savings account. Companies like ETrade and INGDirect don’t use minimum balance requirements. Your credit union or local bank can also help you in getting an acceptable savings account rate, while, most online banks usually pay higher interest due to lower overhead expenses.
After you have your high-interest savings account and credit card with cash rewards opened, it’s time to use the credit wisely, don’t go beyond half of the credit limit and don’t put any purchases on the card at any given day that cannot be paid off immediately. Every month, you absolutely need to payoff the whole balance. Pay groceries and gas on your recently opened cash rewards card.
When the end of the month arrives, you will need to do the following:
- Pay all the credit card balance
- Cash out all available cash rewards – if possible transferred directly to your savings account
- Put unexpended money in the high interest savings account right away.
For example, if a credit card offer a 3% cash back and you spend $2000 in purchases every month, you may add $720 annually ($60 each month) to your savings account. That’s not a significant amount of money, but it’s surely better than nothing and requires almost no effort on your part.
Credit Cards : Not As New As You Think
You might think the credit card is a purely modern invention, given the way we have advanced technologically with leaps and bounds over the last few decades especially. But, once again it does indeed have its roots further back, back to the turn of the century; to 1887 to be exact. Edward Bellamy wrote a book entitled “Looking Backward”, about a society that was Utopian, that lived the perfect life. Contained in that book were a full eleven references to the term “credit card”. This is the first known written use of that term itself.
The modern use, by paying different merchants and vendors with one universal card based operation was first thought up and instituted by the creators of the Diners Club card, in order to break the need for multiple cards to pay for everything at a different time. Soon following that success came Carte Blanche, and the very well known and popular American Express close behind that. 1950 was one of the starts of the modern economic boom of credit card use. Whether good or bad, the individual consumer must decide, but it did provide ease of use and less cards to carry around; even though America is the highest per user owner of the devices.
The initial predecessor of the modern card though was something called a Charga-Plate. It was a metallic device resembling a cross between a dog tag and a clip board. It held all of the purchasers pertinent information, including home address, contact info, name, city, and state. They were typically issued by large companies, huge merchants, and similarly large producers of goods to their customers as a unique store based only method of a payment promise. Due to their size as well, they were most often kept not by the purchaser, but by the issuing company at their home office or location of purchase and used at the time of purchase.
Just a few basic facts essentially, but it does show that credit cards aren’t a new idea. The evolution to a modern universal pay system has been morphing and changing over the years to what it is now. Most likely it shall continue and turn into something unrecognizable with distant roots in the future much like it is now for those long ago users of our plastic predecessors.