Do you have one or more credit cards with an ongoing balance on them? If you do you could free up more cash each month by managing that balance properly.
No one should be paying a hefty amount of interest on their credit card balance each month. In fact you could end up paying far less than you are right now, simply by shopping around for a balance transfer offer. This gives you the chance to transfer your existing balance onto a new card, often with 0% interest on that balance for several months. This could be anything from three months through to a year or more, depending on the deal. There will likely be a fee for transferring the money but if you do your sums the fee could well be much lower than the amount you would have paid in interest throughout the same period.
What does this mean for you in the long run?
It means you can pay the same amount of money each month to reduce your credit card balance faster. We’ve said before that reducing debt is far better than saving money, because you’ll never earn as much in interest on your savings as you would pay on your debts. This means the sooner you can get rid of your debt on your credit card, the sooner you can put that cash towards your savings plans.
Supposing you don’t have any outstanding debt on your credit card?
If this is the case, it’s a good place to start from. You may still benefit from swapping to another card though. For example you could find a card that offers cash-back or points to collect if you shop at one or more particular stores. If you make all your purchases on that card and pay the entire balance off at the end of the month you won’t pay interest. You could also earn from the card because you’ll get the cash-back or other perks as a result of using it.
Credit cards are often seen as problematic. They can be if you don’t use them responsibly. However if you focus on using them for your own advantages as discussed above, you could actually make them a key part of your savings strategy.
I spent a lot of time learning from my friends who work for financial companies like the North Shore Advisory Inc and the key is to make sure you are in control of your credit card use. The ideal way to use one is to pay for everything on it during the month, earn cash-back or some other perks as mentioned, and pay it off before any interest falls due. This means you will automatically be earning something from it each month instead of having to pay interest on it.
Of course getting rid of outstanding balances is the most important step to take prior to being able to use a credit card like this. Make this your first step and you will be taking control of your finances from this moment on. You won’t regret doing it.