Saturday, February 24, 2018

Calculated Thought: Making credit cards work for you

November 30, 2016 by Sean Annable, contributing writer

As this season of Nexus winds down and the holiday season gears up, it’s as good a time as any to talk about credit cards. These little plastic rectangles can be useful in your everyday financial life, but they can become a burden. Here are some thoughts to ponder as we tap our hearts out during the busiest shopping season of the year.

Choose the right credit card for your needs. The average student doesn’t need a card with annual fees in exchange for lower rates. This can make economic sense if you hold a balance, but, unless you have money to burn, holding a balance on your credit card suggests you may be living outside your means.

Calculated Thought is a column dealing with student finances that is featured in every issue of Nexus.

Calculated Thought is a column dealing with student finances that is featured in every issue of Nexus.

Find a card with no annual fees that has some sort of rewards program, such as one-percent cash back on purchases. These perks entice you to use your card, hoping that the interest you pay will outweigh the benefit, but you’ll be smarter than that, won’t you?

You should be. It’s been blurted from every personal finance talking head forever, but it bears repeating: pay off your balance. The cards students generally are granted have rates upward of 20 percent; paying the minimum on even modest debt can take years at these rates. Extreme examples aside, if you have the cash, you should pay off anya credit-card debt. If you have an emergency, the card will still be there. If you have a student loan or line of credit, pay your balance with it. Your interest rate will undoubtedly be much lower, and, again, the funds are available on the credit card if needed later.

One easy method to have the plastic devil on your side is to time your payments. Have a student line of credit? Don’t use the card attached for purchases. Instead, use a card as described above. Wait until the interest-free grace period is near its end and then pay it with your line of credit. You’ll delay the interest accruing on your line of credit and reap the small reward of $20 for every $2,000 you spend.

Happy shopping.

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