Oink oink, Piggies!
Today, let’s touch on a subject that affects a lot of people: credit cards. And I’m going to give a very no-B.S. piece of advice that can save your rear when it comes to credit cards.
There is one…and only one way to use a credit card: By Paying It Off In Full Every Single Month.
Let me repeat that. There is one…and only one way to use a credit card: by paying it off in full every single month.
Let that sink in.
What you should also do is to make sure that all of your cards are set up so that your monthly bill is paid in full automatically from your checking or savings account. This way, if you forget to pay your bill one month, you won’t get hit with interest and fees, and your credit score won’t be affected…so long as there’s enough money in the account to pay off the credit card bill (which there should be, or else you’re guilty of spending more than you can afford).
I can hear the trolls now: “But MPB, I’m getting a 0% APR on my credit card for x months! I’ve got money growing in the market!”
Here’s my response: That’s stupid, and you’re lying to yourself that you’re getting ahead.
- 0% APRs are temporary…often only for a few months. This only encourages you to spend more than you should.
- Investing the money you could have used to pay off your credit cards in full is not going to get you anywhere. Why?
- Because the short-term 0% APR deal is short-term, and investing money that short-term isn’t going to allow the magic of compound interest to grow your money.
- Investing for the short-term is purely speculative. Nobody knows what’s going to happen in the market in the next few months. Only over the course of looking ahead several years can we make educated guesses as to what investments will grow.
- If you happen to screw up and miss a payment or something, then you’ll be hit with huge interest rates and any possible gains that you might have made will likely be more than wiped out.
If you don’t pay off your cards in full every single month, cut them up.
You should never spend more than you have. There are almost always ways to save more money. If you can’t or don’t pay off all of your credit cards in full every single month, you’re spending more than you can afford and are likely paying exorbitant interest. Both things are bad. Period.
-Mr. Piggy Bank