Changing Credit Card Bad Habits
Written by Cait Flanders
Saturday, March 9th, 2019
From the day I got my first credit card, I used it the wrong way. Rather than use it to pay for regular expenses, build my credit history and pay off the balance each month, I used it to pay for everything that didn't fit into my regular budget — and then some. It only took a few years for credit card companies to extend thousands of dollars to me thanks to my credit limit, which I maxed out. I grew to dread seeing the balance on my credit cards.
It got to the point where I avoided looking at my credit card statements altogether, peeling back just the corners so I could see what the minimum payment was and then throwing them away. It wasn't until a year after I paid off all my outstanding debt that I finally started to use credit cards the right way, and now see them as one of the best tools in my budgeting system.
Something I've discovered in my years of writing about personal finance is that many of us take this similar path with our credit cards.
Robb Engen got his first credit card in university, when he says he shouldn't have even been thinking about borrowing money. “I didn't use it much at first," says Engen, author of the personal finance blog, Boomer and Echo. “But when I moved out of residency and into my own home, that's when I started misusing it." Engen started bringing it out to the bar, and taking out cash advances, and it didn't take long for him to max out his limit. “It was the cardinal sin. I still cringe thinking about that."
Rebeca Solares's story is almost identical. “I got my first credit card when I was 18, shortly after I graduated from high school," she explains. Solares adds that she didn't use it often, at first, but that's perhaps because she was living at home and going to school. "When I moved out to Minnesota, after school, I had no money so I was using credit a lot. I'd pay for my groceries by credit card and think, 'I'll pay it off next payday.' I quickly maxed out my credit, doing that."
Fortunately — or unfortunately — being maxed out forced Engen and Solares to change their ways. But it wasn't until they were debt-free that they began to use credit cards to their advantage. “I paid off my credit card debt and then stopped using them for a while," says Engen. “Instead, I used debit and cash, budgeted, and was just really careful with my money." The turning point came when he and his wife realized they could use credit cards to earn rewards instead.
With careful budgeting and the right cards, Engen and his wife began earning more than $1,500 per year in credit card rewards. And it took Solares time, but she's now in the same boat. "I use my cards to earn travel rewards now, but I can pay them off every month," she says.
For some, learning to harness the power of credit cards is a skill that's developed over time. Just keep in mind that credit cards are a powerful tool: if you use them to your advantage, and pay off the balance each month, the returns can be great.
This article or video (the “Content”), as applicable, is provided by independent third parties that are not affiliated with Tangerine Bank or any of its affiliates. Tangerine Bank and its affiliates neither endorse or approve nor are liable for any third party Content, or investment or financial loss arising from any use of such Content....
The Content is provided for general information and educational purposes only, is not intended to be relied upon as, or provide, personal financial, tax or investment advice and does not take into account the specific objectives, personal, financial, legal or tax situation, or particular circumstances and needs of any specific person. No information contained in the Content constitutes, or should be construed as, a recommendation, offer or solicitation by Tangerine to buy, hold or sell any security, financial product or instrument discussed therein or to follow any particular investment or financial strategy. In making your financial and investment decisions, you will consult with and rely upon your own advisors and will seek your own professional advice regarding the appropriateness of implementing strategies before taking action. Any information, data, opinions, views, advice, recommendations or other content provided by any third party are solely those of such third party and not of Tangerine Bank or its affiliates, and Tangerine Bank and its affiliates accept no liability in respect thereof and do not guarantee the accuracy or reliability of any information in the third party Content. Any information contained in the Content, including information related to interest rates, market conditions, tax rules, and other investment factors, is subject to change without notice, and neither Tangerine Bank nor its affiliates are responsible for updating this information.
Tangerine Investment Funds are managed by Tangerine Investment Management Inc. and are only available by opening an Investment Fund Account with Tangerine Investment Funds Limited. These firms are wholly owned subsidiaries of Tangerine Bank. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.