Monday, November 14, 2011

Saving Money by "Freezing" your Credit Cards.

It used to be that America was a cash only society.  That is we paid for everything with money we had and not with money we didn't have.  But not anymore.  Today people put everything on credit, and often because they are lazy, or maybe just forgetful, they don't make their payments on time, and this leads to having to pay interest.  But do you realize that paying 5, 10, 15, even 20% interest really taxes your wallet?
Imagine if you owed 10,000 dollars on your credit card and you were paying 10% interest.  That means if you immediately paid back what you owed, you would be ending up paying $11,000 dollars instead of the initial $10,000.  But what if you couldn't pay it back quickly enough, and you were in debt for several years.  You end up paying thousands in interest before you even pay off the principal!  What a lot of wasted money!
So what do you do?  Do you cut up your credit cards and throw them away so you never get in debt? 
No, there are other alternatives.  And, I've heard of people doing rather ellaborate things to keep themselves from the tempation of using their cards on frivolity rather than on things they need.  I knew of one guy who would bury his credit cards several feet down in the back yard.  That way if he needed to use them, it would take him a while to get them.  And while he's digging, he would be wondering if he really needed what he wanted to buy as much as he thought he did.  This helped keeping him from "impulse" buying, which is usually what leads to debt in the first place.
Another family would practice "freezing" their credit cards.  By that, I don't mean they called the company and froze their accounts.  No, they froze their cards LITERALLY!  That is, they would put them in tupperware full of water and place them in the freezer.  That way both husband and wife would have to talk about using them for purchases, and they would have to wait for them to thaw out, before they could make those purchases!  What a novel idea, huh?  That sure kept them from buying things hastily.

But when it comes to credit cards they can be used not only to buy things, but also to MAKE money.  That's right, you can actually make money off of credit card companies.  Here's how to do it.

1.  Use your points for cash!

Most credit card companies offer rewards for using their card.  These rewards are usually in the form of miles or points.  The more points you get, the more rewards you can earn.  Most people use their points for products or services.  But did you know you can turn them into cold, hard cash?  That's right.  You can actually convert your points to one of three things: 

a.  gift cards worth a certain amount at certain stores
b.  a check for a certain amount mailed to you
c.  credit on your next bill statement

That means the more you use your card, the more you can potentially prosper.  But this is only if you pay it off each month and never incrue any interest.  So the next time you use your credit card, make sure you only use it for what you can pay off that month.  Don't ever get in debt.  For the more debt you have the more you'll end up paying in the long run.  But the sooner you pay off your card without getting in debt, the more money you'll get from it!

2.  Sign up bonuses

Most credit card companies are offering promotions to new clients who sign up for their services.  These can even go as high as offering a person 150 dollars cash just for signing up for the card.  That means you can potentially get a few hundred dollars just for signing with that company.  But usually that is contingent upon whether your spend a certain amount that first month.  So sit down, make a budget, and then instead of paying cash or check, put everything you spend on that card, and then pay it off in full the first month.  After a few months, cancel it, and do it all over with another company and another card.  You can come out ahead instead of behind!

3.  Settle for less.

If you are in debt over your head, then there is a way out.  Many credit card companies are now settling for less.  And if you are able to somehow come up with the money to pay off about 50 to 75% of your total card debt, oftentimes companies will negociate with you to forgive the rest of the debt (seeing as how through interest, you have already paid them double and even triple the initial loan). 
Be careful, however, as there are many companies out there that use this tactic as a scam and claim to want to help you with this, while the ask you to "pay" them for their help.  Instead of a third party, try to go through the credit card company directly, and tell them, "I pay the full amount, but I have 3/4 of it, and I want to get out from under this debt! Will you accept this and cancel the rest of what I owe you?"  Oftentimes, they will accept your offer and let you out of the rest of what you owe.  Especially if you casually mention that you are on the verge of bankrupcy and considering filing for it in the next week or two.   (Note:  Make sure you get it in writing if they agree to this, and usually it's good to have a lawyer to make sure you are not liable for anything else). 
When it comes to credit card companies, it's all who you talk to.  If the person you speak with doesn't want to met you in the middle and work with you, always ask to speak to a supervisor.

4.  Be nice when speaking to representatives about a missed payment.

If you miss a payment, you know that they will start charging interest.  But if you have a history of paying on time, often you can call the company and complain with the excuse that you did not receive your bill on time.  Usually they will give you a one time courtesy of giving you a pass for that month and allowing you to pay the amount due with out any fees.  But be warned.  Usually they only do that ONCE!  And oftentimes it all depends upon how the phone operator feels that day. 

So when it comes to credit cards, they can be either a blessing or a detriment.  It's all about how you use them.  You can use them to GET money, or you can use them to GET YOURSELF in trouble!  It all depends upon how dependable you are.  If you only spend what you have and never go over your set monthly income budget and you pay it off completely every month you use it, then you can prosper with the rewards programs.  If you screw up and miss a payment, you still can get a mulligan.  But if you don't use your card wisely and get in debt up over your head, then you need to do everything possible to get out, as interest rates will eat you up and get you working not for yourself, rather for the credit card companies.

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