Debt and Divorce Series: Using Credit Cards while Slashing Debt
Keep using Credit Cards without Debt Creeping Up On You.
Debt and divorce go hand in hand, and debt and credit cards don’t have to. Using credit cards has become a necessity, but must be used wisely when spending in the aftermath of divorce.
Here are basic tips for reaping the benefits of credit cards while laying low on debt.
Tip #1: Consolidate Credit Cards
Having a lot of credit cards can feel empowering. What I discovered is that the benefit of having several credit cards was overshadowed by the time it took to manage them all. My expenses are more than just actual costs … my time is valuable too. By consolidating credit cards, I drastically cut my time wasted on chasing each one. Plus, working on increasing credit limits on a few cards is more beneficial than having low limits on dozens of cards. I needed to build my credit limits, and the only way to do that is to concentrate on just a few. Plus, a big part of getting away from the ‘debt and divorce’ association is in reducing the temptation to spend money I don’t have. So, I treat credit cards like debit cards.
Tip #2: Pay As I Go
By using my credit card like a debit card, I’ve found a better way to conquer debt. To make this ‘debt and divorce’ strategy work, I pay off the balance as I buy, and therefore never pay the Annual Percentage Rate (APR). Mastering this art has been critical to quickly decreasing debt, and it’s not easy. First and foremost, I never spend what I don’t have. And because I know I’ll pay off the balance as I go, I never really need to worry about the due date. I also get an extra level of protection from what I would get using my debit card. If my debit card gets hacked, I may have real issues, and my bank may or may not help me recoup my losses because debit cards do not have the same levels of protection as credit cards. If, however, my credit card gets hacked, I can instantly dispute the charges and have them removed during the investigation. Plus, I can rack up rewards.
Tip #3: Rack Up Cash with Rewards Credit Cards
sing credit cards like debit cards have advantages beyond just protection. By using a rewards credit cards, I earn points for every dollar spent. Again, by using my credit cards as debit cards, I am earning a lot more points than I normally would – points for everything from my cell phone bill to donuts, groceries to gasoline. But I’m not just accumulating points … I’m hoarding them. For me, one of my bigger expenses of the year has been Christmas. So my second ‘debt and divorce’ strategy is that whatever I earn in rewards throughout the year becomes my Christmas budget. I use the reward points for everyone’s Christmas gifts and avoid having a huge bill at the holidays, or the temptation to pile on some yuletide debt.
So, but using my credit cards wisely, my credit score is much higher than it was when I was married, and my only debt is my mortgage. Trust me, the vicious cycle of debt and divorce can be broken.