Credit Cards - A Topic Worth Dwelling On

I mentioned several terms in the last post which I’d like to define in case there’s any confusion.

GRACE PERIOD  (As defined by the book The Money Book for the Young, Fabulous and Broke – Orman) – “The period between the end of your billing cycle and the day your payment is due; you will incur no interest charges during this period. If you carry over a balance from a previous month, there is no grace period…Credit card companies love to shorten the grace period; always check your payment due date when you receive your statement to make sure you know when you need to get the payment in to avoid interest charges.”

For example, on a credit card I have, my billing cycle ends on the last day of the month, and my bill is due on the 18^th of each month. Per the instructions above, always check to see if they shortened your grace period, and in effect, demand payment from you sooner.

Another piece of awesome advice from the aforementioned book:

If you have multiple credit cards that all carry a balance, concentrate on the card with the highest INTEREST RATE (not the largest balance). An effective technique is to list the credit cards in order of interest rate – highest to lowest – write down the minimum and maximum your credit card company is asking you to send in, and pay as much as possible over the minimum amount on the credit cards with the highest interest rate. The book suggests at least $50 dollars over the minimum amount you must pay on the highest interest rate credit card.

Keep paying the monthly minimum on the lower interest rate cards until the highest interest rate cards are paid off. Do this for each card until the balances are gone.

I found this advice in particular to help so much in prioritizing which student loans and credit cards to concentrate on! Remember to check out www.bankrate.com as your go-to resource for credit-related information.