For many a military family, credit card debt is the bane of their existence. Do you know how to properly utilize a credit card?

2016-09-27T10:24:34-04:00

Response by MSG Private RallyPoint Member made Sep 27 at 2016 10:31 AM

2016-09-27T10:31:04-04:00

Use it only when absolutely needed. Never do big item buys (especially if your card has a high interest rate).

Response by Sgt Private RallyPoint Member made Sep 27 at 2016 10:31 AM

2016-09-27T10:31:00-04:00

SFC Christopher Perry I have two credit cards that I only use for larger purchases. I pay them off as soon as I receive the bill. There is no reason to pay high interest to a credit card company when you can better use that money elsewhere.

Response by SFC Christopher Perry made Sep 27 at 2016 11:07 AM

2016-09-27T11:07:01-04:00

While I do like the responses here thus far, I am going to expound on it a little bit.

First off, it is good to know exactly how a credit card plays into your scores. If you have a balance on a credit card that is roughly 80% of the available credit it will drive your scores down. If you have a approximately 50% balance it is more or less a wash. Meaning it is not going to drive your scores up or down. Now, if you carry a balance of around 25% of the credit available to you, it will in fact drive your scores steadily upward every month. How much this effects your scores will depend on your overall credit profile. Meaning someone who has nothing but said card will reap higher rewards than someone who might have a bit of a checkered past (credit wise). However, it will work for both of these people.

Simply charging something and paying it off is good for someone who already has the scores they want. However for those that need to improve their scores, it is better to pay off all but that 25%. Yes, you will pay interest on this small balance, but you are paying for your steadily improving score. Paying the card off does not reap the same rewards. The credit score is driven by your showing the ability to manage your finances. It can take up to a year for a new item added to your credit to truly positively effect your scores. Not really fair, being as a negative item will impact you almost immediately. Unfortunately that is simply the way things work.

There are some credit cards that make this hard to do. They will simply reduce your available credit when they feel you are not utilizing it the way they want. However, others will play along quite well. Other will actually keep raising the available credit in an attempt to entice you to spend.

Most importantly, you will notice I said credit card (singular). Pay off the others and close them. Use the one card to drive the scores. We all need one card these days. Heck you cannot even rent a car without it. Multiple cards are just too much of a temptation for most people.

Response by SCPO Private RallyPoint Member made Sep 27 at 2016 11:28 AM

2016-09-27T11:28:15-04:00

Yep...1, take scissors in left or right hand. 2, cut card. 3, deposit in trash can.

Response by SMSgt Lawrence McCarter made Sep 27 at 2016 1:48 PM

2016-09-27T13:48:50-04:00

Its just not Military families either, 75% of Americans are in some level of credit card debt. Excessive interest rates are a major factor in this. I have dumped cards because of the interest rate which i thought was excessive esp having other cards with very low interest rates. The high interest rates offered to lower rate as they were losing Me as a customer, I dropped them anyway as it still didn't match a reasonable rate with other cards. Also one bank that started charging for items that never had charges before (after the taxpayers bailed them out) They offered to waive the fees for Me but I closed all My accounts in that bank. I replaced all that banks accounts with another local bank that played no such games and also Federal Credit union. I never regretted that move. I'm not interested in being a victim of their greed.

Response by SFC Everett Oliver made Sep 27 at 2016 2:25 PM

2016-09-27T14:25:43-04:00

I have discovered that they work best in conjunction with a pair of shears.... However since they are almost a necessary part of our lives these days I can only say to keep their usage at a minimum, the lower the balance the better...

Response by Capt Private RallyPoint Member made Sep 27 at 2016 3:59 PM

2016-09-27T15:59:03-04:00

We have several. One pays cash back and one that provides us with train travel. Total interst paid for the past several years - zero.

Easy credit can be good, even a life saver, but, one MUST remember that it must be paid and the interest if not paid is astronomical.

Response by SSgt Private RallyPoint Member made Sep 27 at 2016 8:22 PM

2016-09-27T20:22:45-04:00

Nope. As bad as I am with money, there's no way I'm getting a credit card. Wife and I have been married for 10 years, there's a few times where it would have been nice to help us out of a bind, but then again, that's why we don't have it... Neither one of us has ever had one, and we don't plan on getting one any time soon.

Response by ENS Private RallyPoint Member made Sep 28 at 2016 4:13 PM

2016-09-28T16:13:17-04:00

I have 21 financial accounts according to the Credit Bureau. Of those 21, 12 are open credit card accounts, resulting in a total credit limit of $70,000. Because of my SCRA benefits, I have been fortunate enough to own some very prestigious cards. My credit score is climbing exponentially. However, I did not get to this point over night.

At one point I was considering filing for bankruptcy because I didn't know how I was going to make my payments. I asked myself, "How did I get myself into this mess?" Going in, I planned on using a credit card like a debit card. Somewhere that got lost. I spent close to ten-thousand dollars on a parachute, I bought a $20,000 car on a credit card because 4% APR was much better than NFCU's 11%.. I furnished a house and bought a wedding ring that cost more than my parachute. I have felt the crippling sensation and fear that comes with irresponsible use of credit cards..

However, in the short coming months I will be completely debt free. I have learned how to manage debt andcredit cards properly (the hard way). At one point I had to make my cards inaccessibly. Everything was set to auto-pay (still is), but I was living on so very little in order to get by. That was a terrifying and very stressful time in my life.

What I will say, however, is that once your head is above water and you can properly make payments without having to sweat every time you buy a bag of M&Ms, you can expect your credit score to go up. Credit cards are a very useful resource. The rewards points, money back, and rewards miles I have earned from proper credit card use has been outstanding. I am flying both my wife and myself home completely free just for using these cards. So they definitely have their perks.

Understanding how credit cards work, how APRs affect payments, perks and benefits to cards, as well as how they affect your credit score is important, however meaningless unless you have a plan in place on how to pay those debts off while maintaining a suitable and responsible lifestyle.

Once I am out of debt, I will cycle through my cards every month, using them like I would cash or a debit card. This way, I continue to show activity on the card, am eligible for credit line increases, and continue to earn rewards on each card - all the while reaping the benefits that inherently come with the cards (like a buy one get one free airline ticket *CHA-CHING*.

**On a side note: if you are active duty, you have SCRA benefits. Many companies will lower your APR to 6% or less while you are on active duty and retroactively refund the difference of any APR above 6% you paid BEFORE you joined the military (including student loans and credit cards). Many credit card companies will allow you to keep this perk 1 year after you exit the service. This is how I am able to own and afford two cards that would normally cost $450 a year. The only downside to owning such cards is that once you leave the service, those fees are no longer waived. Thus, if you do not have other cards of a similar age, this may make a small impact on your credit score (negligible). Because of the number of cards and the average age of my account history, when these accounts are closed, it will have very little impact if any at all. However, because I am reaping literally thousands of dollars in free benefits because of SCRA, it is completely worth a 1 or 2 point impact years from now. All you have to do is call and ask them to apply your SCRA benefits to your account. (Navy Federal and USAA will NOT apply these benefits to your account any time after you joined).

Response by Cpl Justin Goolsby made Sep 29 at 2016 12:26 PM

2016-09-29T12:26:29-04:00

For me, credit cards have always been utilized for the large surprise purchases that no one really plans for. Typically it'd be some form of a car repair because those are always few and far between with proper upkeep. But if I was also taking my family on vacation, I'd pay my balance off just in case we needed a little extra spending money. Most times I don't even use it, but it feels good to have a cushion in case something bad happens in the future.

Response by Sgt Wayne Wood made Sep 30 at 2016 2:35 PM

2016-09-30T14:35:08-04:00

don't. if you have a credit card only use it for bona fide EMERGENCYS (no, running out of beer is not one). join NFCU or USAA & get a debit card, have your pay direct deposited, and live within your means.