The Money Talk Credit Card Guide - 137

[00:00:00] Do you want to minimize your debt and maximize your spending? We'll join me today as we talk about the brand new Money Talk Credit Card Guide. Welcome to Money Talk with Skyler Fleming, where we go beyond the dollars and cents. Let's get talking.

[00:00:14] Welcome to today's episode of Money Talk with Skyler Fleming. Today we're talking all about credit cards. And I have built a brand new credit card guide, which you can find at Money Talk with Skyler Fleming.com slash resources.

[00:00:26] This is the first new resource I've released in quite some time and it's a good one. The guide and resource was asked for by a listener, so if you have anything on your mind that you'd like me to do some extra research on,

[00:00:36] head over to Money Talk with Skyler Fleming.com slash contact or find my email in the show notes and let me know what's on your mind. I'd be happy to do some research, put an episode together, and maybe it could even become a brand new guide.

[00:00:48] We're going to talk about the credit card guide today as well as some other important things to know about credit cards in today's episode.

[00:00:54] But the guide itself covers how to get a credit card secured versus unsacred credit cards, how to use credit the right way, how to pay off your credit card, how how credit cards impact your credit score, credit card rewards and getting out of credit card debt.

[00:01:09] We're going to talk about even more in this podcast episode today on top of the great tips in the brand new resource. So be sure to relax and get ready to learn how to optimize your spending with credit cards.

[00:01:19] The Money Talking Points for today's episode are, should I get a credit card? How do you avoid credit card debt? Do you have any experience with credit card debt? With the Money Talking Points in mind, let's get talking. Alrighty, welcome to today's episode.

[00:01:44] We're going to go ahead and walk through the credit card guide page by page. So this is a great chance to head over to YouTube or Spotify where you can watch the video version of this podcast because I'm going to put it page up on the screen.

[00:01:55] So let's start at the beginning. This is a brand new resource called The Money Talk Credit Card Guide, how to avoid credit card debt and maximize your spending. So first it just goes over how to get a credit card. And things you should consider and talk about.

[00:02:09] I always like throwing in money talking points, things that you can talk about and have conversations with friends and family. But things to consider, things like, do you want to pay an annual fee? Are you looking for a credit card with a low interest rate?

[00:02:21] Do you want rewards? Do you want a sign of bonus? These are all things that different credit cards offer differently. So there are things you got to consider for me and my wife.

[00:02:30] The do you want to pay an annual fee is a huge no for us right now. We don't even want to consider it, that's just not where we're at.

[00:02:36] But maybe you are at a point where a credit card fees a great thing because of all the rewards you get with it. That's just something you have to consider. And then what will you need?

[00:02:43] Of course you need your annual income, personal information like your social, your contact info, bank info, other simple information. It's pretty easy. And then for how to apply, it's really, really easy. They're all online applications pretty much.

[00:02:56] So I didn't want to list out specific steps for some specific card because they are all slightly different. But generally it's what is your name? What is your address? What is your social? What is your income? Your approved or not approved? Things like that. It's pretty simple.

[00:03:10] You just find whatever credit card you want to get, whatever answers those questions for you to consider. And then find their online application. The next page and the resource talks about the two different types of credit cards. So at least the two common different types of credit cards.

[00:03:23] So a lot of people will ask, well I was offered a secured credit card. What does that even mean? Well, a secure card is backed by your money. It includes a refundable security deposit and that's security deposits to help you avoid debt risk.

[00:03:35] So if you're someone who maybe has never had a credit card, credit card companies will say, hey, give us $1,000 that'll be your credit limit. And then you can spend on the credit card to build your credit and everything like that. But if you fall behind and don't pay,

[00:03:49] they will use that $1,000 that you gave them to back your credit card in order to pay it off. And then you avoid running into big credit card debt being sent to collections, things like that. It is convertible to the better type of card called the Unsecured Credit Card.

[00:04:03] It'll likely have a higher credit limit. It can lead to credit card debt because it's not backed by your own money. And it's what's a normal credit card like when you hear people mention, oh, I got a credit card today.

[00:04:14] That's likely what they're talking about is the Unsecured Credit Card. But there's no deposit required and these ones usually have rewards and perks where it's secured cards. Usually don't have rewards and perks. Things to consider when you're talking about the different types of credit cards,

[00:04:27] ask yourself them I just started out with a credit card and my worried about not being able to pay it back. And do you know how to manage paying off a credit card regularly?

[00:04:35] Those are great things to consider when it comes to figuring out which type of credit card you want to get. But next let's talk about how to use the credit card the right way.

[00:04:43] So as you can see on screen here or for those of you listening, I'll walk through each step. The first step is to spend on your credit card and that's okay.

[00:04:51] You can spend on your credit card but you want to be sure that you are aware of how much you're spending. And ask yourself what I spend this money if it was coming from my checking account.

[00:05:00] And remember no credit cards are worth paying interest, no credit card rewards are worth paying interest at all. And the second thing is to monitor your credit balance. It's important to monitor your balance regularly so that you can stay on top of it.

[00:05:13] You can be weekly, monthly but it should definitely be monthly at the bare minimum. You have to make sure to keep an eye on your balance and make sure to follow step three which is pay off your credit cards in full.

[00:05:23] Pay it off every single month to avoid interest. That is what you have to do. How do you pay off your credit card? Well the key is to avoid interest by paying the statement balance. So when you get your credit card statement, there's a balance on there.

[00:05:36] That's the balance when the statement generates or when the statement loads or whatever you want to call it. That's called the statement balance and that is the amount you need to pay to avoid interest.

[00:05:45] So as you can see here on our awesome credit card guide, this lady saying I wonder how my friends make sure to stay out of credit card debt. The way to do that is to make sure to pay off the statement balance.

[00:05:55] That could include when you get the statement you review it for any fraudulent transactions that you say. There's my statement balance. Here goes the payment to the credit card company which are mostly all online.

[00:06:05] But then once you pay that amount, you don't have to worry about any sort of credit card debt or credit card interest. So talk with your friends, ask them how do you avoid credit card debt?

[00:06:14] That's one of our money talking points for today that we're going to get to in a little bit. But it's a great way to start a conversation with a friend. And now you're probably asking yourself,

[00:06:21] I've heard from a bank or from someone at my local credit union that I need to carry a balance on my credit card in order to build my credit. Well let's talk about and understand the impact on your credit score for credit cards. First, pay it in full.

[00:06:35] You do not need to carry a balance to improve your credit score. That is absolutely false. The amount that's being reported on your statement balance is what goes into things like utilization, your credit card length and your late payment.

[00:06:47] So if you're paying each month on time with that statement balance, you don't have to worry about late payments because those can bring your credit squared down quickly and make causing increase interest. If you're running a balance on your credit card and paying off that statement balance

[00:06:59] each time before it's due, your utilization is what shows as the percentage of how much of your credit card line you're using. And length is how long you've had the card. So the longer you've had cards, the more it'll help your credit score.

[00:07:13] That's why people will often say keep your oldest credit card in don't shut that one down because that can bring your average length way down. And of course, in the credit card guide we have to talk about credit card rewards. And I think they are worth it.

[00:07:25] I think they're a great way to optimize your spending. Like I said multiple times in this episode. And it can help you cover the other expenses in life. Like little things can be covered by rewards and that's awesome.

[00:07:37] For example, it's say you spend $20,000 per year on a 2% back credit card. That's $400 in rewards right back in your pocket that you didn't even have to do anything about. But you have to be extremely careful to avoid interest because as you can see on the screen here

[00:07:52] and on the resource and you head over to moneytalk with scatherflamming.com slash resource to get today's brand new free resource. No rewards are worth it. 20% interest is greater than 2% rewards if you're carrying a balance.

[00:08:04] So if you're carrying any sort of credit card debt, forget about the rewards and focus solely on getting out of debt. Some talking points to discuss with your friends. Ask your friends how am I going to stay out of credit card debt?

[00:08:14] How do you stay out of credit card debt? What do you do with your awards? What do I think I'm going to do with my rewards? And do you want to credit card hack?

[00:08:21] Which is a deeper topic to dive into and I even have a podcast episode about why you don't have to credit card hack. There's a lot of little tricks and tips you can do with credit cards too.

[00:08:30] Make it so that you're optimizing your rewards and optimizing points to travel and it can get really detailed and really complex very fast. So think if that's something you want to do. So now we're coming to the end of the guide sadly.

[00:08:42] And the last page here is getting out of credit card debt. There's a couple of ways you can get out of credit card debt. And the two most popular are the snowball and the avalanche. The snowball includes paying off your lowest balance.

[00:08:53] And this is what is known as the snowball, like I said, and can help you build momentum. It can help you get that ball rolling in the right direction by taking the smallest balance and getting a quick win.

[00:09:02] And then you continue contributing that extra money you have towards the next lowest balance. And then what you pay that off, you put all that money towards the next one. And it builds and builds as you go from a hundred dollar extra payment on the first one

[00:09:14] to two hundred dollars worth of extra payments on the next one. To three hundred as you just keep adding up those other payments you're making and including them in the next one to pay it off even faster.

[00:09:24] So it can be really great for your behavior and your emotions as you see yourself get some quick wins. Another option is the debt avalanche, which is paying off the highest interest rate. This is the one that mathematically is the best because it saves you the most money.

[00:09:37] When you start at the highest interest rate and pay that one off, you're saving the most because you're getting rid of that highest interest rate. This one can be tricky though if you aren't dedicated to the math.

[00:09:45] That's where the debt snowball can really come in handy and help you build momentum and get your emotions and behavior working the right way. But consider that an avalanche, if you're someone who wants to optimize the math and get out of saving the most money on interest.

[00:09:59] And of course another way to get out of credit card debt is to avoid it all together. We've talked about throughout this episode how you don't have to carry a balance in order to build your credit.

[00:10:08] But if you avoid debt, it's the easiest way to not have to worry about it. Like I said, rewards aren't worth it if you have to pay interest and you do not have to carry credit card debt in order to build your credit score.

[00:10:19] I'm going to say that multiple times this episode because it's something that needs to be preached and changed on how people view credit cards. If you're carrying a five to ten dollar balance on your credit card in order to build your credit, that is just false.

[00:10:32] Don't do it. Do not carry a balance on your credit card in order to build your credit score. It's one of the ways you can build your credit score for free. And when I say for free, I mean by not paying interest.

[00:10:43] It makes sense that a bank might tell you, oh, you need to carry a small balance on your card in order to build interest. That small balance you're carrying and that small little bit of interest you're making is cash right in their pockets.

[00:10:53] So that's how they want to make money. So do not carry a balance on your credit card at all. Pay it off every single month, every single week, in full, and don't worry about it. But that's the credit card guide. Next, let's talk about the money talking points.

[00:11:07] We have some great money talking points in today's episode and let's start off with the first one. Should you get a credit card? I think you should. I like credit cards a lot but you have to be careful with them.

[00:11:27] They are a huge trap and they can be very dangerous. If you don't have your spending under control then you probably should not have a credit card. Credit cards can help you optimize your spending but they can also unlock it and allow

[00:11:38] a much higher limit than your current spending does if you don't have one at all. Or if you aren't sure how to use a credit card already on your in credit card debt then you need to get out of it.

[00:11:47] But one way to think about it, if you don't have a credit card right now, your credit limit is your income. So if you're constantly bumping up against that or living paycheck to paycheck, a credit card

[00:11:56] can be very dangerous because when you get a credit card, that limit may be five or 10,000 or more and once you max that out that's very dangerous. That's a lot of money to be available to spend if you don't have control on your spending.

[00:12:09] So like I said in the guide, the statement balance is key. You have to pay it off every single month. No questions asked. Settocatins are a routine to pay it off if you want to pay it more quickly but you have

[00:12:23] to pay it off at least monthly so look at something like paying it off weekly. Maybe you paid off as soon as the transaction comes in to make it almost act like a debit card.

[00:12:32] That's a little bit of a way to hack it when you're first getting started but that can be a lot of work as you keep using the credit card but you could pay it off every day.

[00:12:39] You could pay it off every Friday, pay it off every first to the month like my wife and idea we paid off on the first. I don't even look at the statement balance if we're being honest because I know I

[00:12:48] make sure to pay it off in full on the first and it works out. But since my wife and I track our spending, I pay off the balance at the first like I

[00:12:55] said and we pay it off in full so the same balance is always going to get paid off. But the ultimate fallback is to make sure when you get that statement in your email

[00:13:03] that you go and look at it, check it for the charges understand where you're spending money and then pay off that statement balance. The third money talking point is do you have any experience with credit card debt? I do not have any experience with it personally.

[00:13:16] My wife and I have never been in credit card debt but I've seen those around me with credit card debt and it can be crippling. It can be frustrating. It can be confusing. How did I end up here? How do I get out of this?

[00:13:27] But do you have any credit card debt? Did you get out of credit card debt? If you have a story dealing with credit card debt? Let me know.

[00:13:34] My email is in the show notes I'd love to share your story if you have one or you can come on the podcast if you want to talk about it more.

[00:13:40] And while I don't have any direct experiences, it can leave a huge impact on people like I said. It can leave you feeling trapped at a control. It can turn your life into a monthly payment and that can be scary when your life is a subscription.

[00:13:51] Especially if any sort of emergency happens in your life. Start thinking about that. What if you're living life on a $45 minimum payment and then boom something big happens in your life? And that's when credit card debt can become a huge burden.

[00:14:04] And while people may see a credit card as an emergency fund, you have to make sure you have cash saved up before you even start using a credit card because that cash

[00:14:11] is going to be what pays off that credit card when you have to use a varn emergency. So you can put emergency expenses and you can put regular expenses on a credit card.

[00:14:20] But you have to make sure you know how you're going to pay them off and full at least every single month. So that's the money talking points for you. Thanks for listening so far. I appreciate everyone listening to today's episode.

[00:14:30] Quick plug head over to moneytalkwithscatherflamming.com slash resources to get today's credit card guide. But let's talk about the handy hint next. Today's handy hint is going to be automatic payments because they are the way to go.

[00:14:51] Set up automatic payments for the statement balance, which is always an option. You'll see credit card companies set you up on automatic payments for the minimum payment. But what you want is automatic payments for the statement balance.

[00:15:01] Every card can do this and this is how you can make sure you pay the credit card off in full every single month. But you want to make sure you have the money obviously in the account you set up for automatic payments.

[00:15:11] So if you're in a tight spot, maybe you could change the auto payment to the minimum payment. But you want to make sure at least the minimum payment is set up so you never miss a payment and don't hurt your credit by doing that.

[00:15:22] But automation is the way to take behavior out of personal finances. It can be a great way to get that little extra boost to get over those behavioral and emotional hurdles. And you have to use automation to help you out there.

[00:15:34] And I also have another resource called the six behavioral finance tips. It's also found on my resources page on my website. The next let's talk about the personal finance power up. Today's power up is all about credit card rewards.

[00:15:55] Using a rewards credit card for all your regular expenses and then paying it off in full each month can effectively earn you hundreds of dollars a year in rewards. And it can help offset costs like travel or holiday shopping.

[00:16:06] My wife and I recently paid about $150 for our flights to Hawaii. I love telling people that because it's kind of a little bit of a shock factor. But then we say, oh yeah, the credit card rewards really came in handy. And this was to fly to Hawaii.

[00:16:18] One flight between the islands and then fly back home. It was a huge saving because of all those rewards. Like I'm telling you about we have even more rewards left over that we plan on using on the rest of our trip.

[00:16:27] But after a few years our rewards added up to several thousands of dollars. Other rewards and how awesome is that that you have rewards you can spend. But again, let's go back to one of the questions. Do you know how to handle your spending?

[00:16:40] Do you know how to handle using the credit card because if you don't, no amount of rewards is worth it. But your rewards can be enough to pay for tech upgrades. It can be enough to pay for trips for your family or cause a giant discount.

[00:16:51] Enough to pay for the little things that you like to get every now and then like maybe. A soda, a coffee, things like that.

[00:16:58] Spending your money on the card that offers rewards can level up your savings and give you a discount later down the road on things you want. But you have to make sure you're tracking your spending and keeping it under control. I need to emphasize this a lot.

[00:17:10] You don't have to carry a balance on your credit card and you shouldn't carry a balance on your credit card in order to optimize your spending the best. And who knows? Maybe the rewards may even come in handy in case of an emergency.

[00:17:20] Maybe you have a small one or two hundred dollar emergency that you really don't want to deal with. And so you just use your rewards to pay it right off on your credit card. And that can be awesome. So today's power up is credit card rewards.

[00:17:32] Consider using them the right way and use your credit card the right way by not carrying a balance. But what's at stake? Let's talk about the financial stakes next. You need to understand the financial stakes of carrying a high credit card balance.

[00:17:54] And the long-term impact it will have on your financial health. The stakes of credit card debt are huge. It can feel like something you can never get out of because you likely will never get out of credit card debt.

[00:18:05] If you don't stop using them and you found yourself in credit card debt. If you found yourself you have to take a hard look at your finances and understand your spending and you have to stop using credit cards.

[00:18:15] Because it's such an easy way to spend more money than you make. You have to cut back. This is where Dave Ramsey does such a good job.

[00:18:21] Because you have to get strict and he's the person who can motivate you and give you the tools to get out of credit card debt. But you have to stop spending on your credit cards full stop. Cold turkey, stop it.

[00:18:31] That's my opinion if you keep using them it's going to be next to impossible to get out of credit card debt. Track your spending, realize where you can cut back and cut the things that are optional And cut using the credit card.

[00:18:42] That's the only way you can get out of credit card debt so you don't feel trapped. Like I said, you may end up feeling like your life is a monthly payment. And that's kind of scary.

[00:18:49] You feel like you don't have any control over your life and you have to work in order to get out of debt. You have to do things you don't want to do because you need to pay on your credit card. Things like that.

[00:18:59] Credit cards can be a huge, ball and chain around your leg, Sloan you down in your life and really dragging you down the stakes are huge. And one way you can see the stakes is to find a credit card pay off calculator

[00:19:09] and look at how unrealist it is to pay off a credit card. It takes forever. At $200 a month it would take 7.8 years, 7.8 years to pay off a $10,000 credit card debt. With an interest rate of 18%, which may even be a little bit low in today's environment,

[00:19:26] you end up paying $8,622 to the bank just for the joy of having a credit card. And that is a ton of money that you're just hand-in-over. Could you imagine saying here's $8,622 just for me spending my money with you? Here you go. Have my money. It's yours.

[00:19:47] That's huge, 7.8 years to give the bank $8,622. And I'm being a little intense here because I want to scare you away from credit cards because I know I kind of hyped them up with rewards in the last section. But you need to understand the stakes are huge.

[00:20:02] Increasing your payment at $300, cut your pay off to 3.9 years and the interest at $3,967. So you should see that as optimistic if you're in credit card debt about the extra money you can put towards it and how much money that will save you in paying it off faster.

[00:20:17] Any extra helps but this is exactly why you have to stop using credit cards. Imagine you keep adding balance to that so you're never fully paying it off. After eight years, you've paid over $8,000 in interest and you still owe them more money. That's crazy.

[00:20:32] The minimum payment is going to take you forever to get out of debt. So you have to stop using the credit card and start for an over a ton of money to pay off that credit card early or else you're going to give up a ton of money

[00:20:44] in terms of interest to the credit card company. So as we begin to come to a close here at the end of this episode, what are others saying? And I reached out to my local choose if I grew up to see what they had

[00:21:03] to say about credit cards and hear some of the first thoughts that came to their minds. Chris said in the group, the first thing to me is to acknowledge that way more people get into trouble with credit cards than benefit from them.

[00:21:13] And honestly, in my opinion, that's why there's rewards and then Chris goes on to say, to be honest with yourself and pursuing credit card rewards if it's a strategy you want to pursue. That said, for those who have spending dialed in

[00:21:24] and are diligent to always pay their credit card on time, credit card rewards can be lucrative with a little bit of effort, which is what I've been saying in this whole episode. You have to have your spending locked in

[00:21:34] and under control because why can credit card companies offer rewards? Because there's more people paying 18% than there are earning 2% on their credit card. So that's something you have to consider. And Susan and the group said travel hacking, which is something that's super fun and a great

[00:21:49] rabbit hold a dive down. If now you're hearing, yeah, I got my spending in control. I want to learn how to spend an optimized my spending. Look into travel hacking, reach out to me with questions and I'd be happy to do further deep dives on this episode.

[00:22:01] But thank you for listening. This has been a great episode so far. I want to wrap it up next with a quick conclusion and summary of what we've talked about so far. So there were a lot of different things we've talked about today's episode.

[00:22:22] And I'm going to wrap it up to help you recall what may have stood out, send me an email or comment on social media what you liked from today's episode and please share with a friend and go have a money talk about credit cards.

[00:22:32] But credit cards can be a double-edged sword. They can offer convenience and rewards that they can be dangerous if they're not managed properly. They can significantly increase your spending limit potentially leading to financial trouble if that spending is not controlled

[00:22:45] but they can be super awesome with the rewards they offer. You also need to avoid credit card debt. Always pay off your statement balance in full every month to avoid debt or establish your routine to pay it off earlier that way you can maintain financial discipline.

[00:22:59] And everyone has their own personal experiences with credit card debt and while personal experiences may vary it's clear that credit card debt can have a negative impact on one's financial stability and mental health. Have a cash emergency fund it's crucial to have to avoid relying

[00:23:13] on credit cards and building credit card debt in emergencies. The handy hint today was automatic payments set up automatic payments for the statement balance to ensure you never miss a full payment. Automation helps remove the behavioral and emotional hurdles in managing your finances.

[00:23:29] Today's power-up was using credit card rewards. They can be great for regular expenses but you have to make sure you pay off your statement balance in full because they can really help you out and over time credit card rewards can add up for travel,

[00:23:41] tech upgrades, other personal treats and enhance your life just a little bit by making it nice that you don't have to pay for everything. But make sure you understand the financial stakes. Carrying a high credit card balance will have severe and dangerous long-term financial consequences

[00:23:54] and you have to escape credit card debt by stopping using your credit cards cut back on spending and track your finances meticulously to get out of credit card debt. And make sure you're paying off debt aggressively with the snowball or have a lunch method

[00:24:06] and cut down on interest because it's going to save you a lot. The quicker you can pay it off, remember over $8,000 and almost eight years just by making small payments on a credit card with those 18% interest rates. In my final thoughts, credit cards when you use them responsibly

[00:24:21] can be a powerful tool for managing and optimizing your finances. They require discipline and a strategic approach though. You have to be careful to avoid falling into credit card debt. With the right habits though, like automatic payments in mindful spending you can leverage credit cards

[00:24:35] and optimize your spending to enhance your well-being and avoid the pit falls of debt. But thank you for listening to today's episode. What did you like? Remember to go to moneytalkwithscallowfunding.com slash resources and download today's credit card guide. And if you found any help,

[00:24:51] any value from the guide or from today's episode consider filling up the form on that page and provide me with your email. I'd be happy to send out updates for future guides or any big updates on podcast news, things like that. So thank you for listening

[00:25:04] and I bet there's a friend or someone you know that would mention the word credit card and share today's episode with him. And this could be a great opportunity for you as well to start a money talk with someone you know.

[00:25:14] Heech him a little bit about your newfound knowledge for credit card and then share the episode and give them the power of a good money talk. Thank you for listening to today's episode. If you want to stay connected

[00:25:23] the best thing to do is to sign up for my email list at moneytalkwithscallowfunding.com You can also send me an email anytime by our planning to one of my newsletter or sending an email to Skylar at moneytalkwithscallowfunding.com. Thank you so much for listening and supporting moneytalkwithscallowfunding.

[00:25:38] You can find my website at moneytalkwithscallowfunding.com. The best way to show support for this show is to share it with a friend and then go and have a money talk. Thank you for listening to this episode of Money Talk.

[00:25:48] I'm your host Skylar Flaming, Have a Great Week.