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Sunday, September 23, 2012

What to do with your credit card bill

Returning form the mailbox, a wad of letters in your hand, you shuffle through them and take in the familiar windowed envelopes with some hope and a little fear.  And there it is, the one with your bank's logo on the front.  "It's just a statement," you say to yourself.  But you know better.  Do you open it first, to get it over with.  Or does it stay on your coffee table, unopened, for days before you finally pluck up the confidence to look.

If you are wondering what to do next.  Here's a few ideas that may help.

1. Make a paper airplane.

Credit card statements make great airplanes. The paper is exactly the right thickness for a sturdy plane. Forgotten how? Just fold in half and open out again. Fold down the corners into the middle, twice, then close your plane up and fold the wings down to the side.  Pick up your plane and hurl into the nearest waste-paper basket.  Don't worry, the bank will send you another one with a nice big late fee next month.

2.  Start a shopping list.

Credit card envelopes are exactly the right shape for shopping lists.  Use the back, so that you don't run into the window.  If you need more room, you can always cut the envelope to open it up and get some more writing room in the middle.  As soon as you get some money to pay down your card, you can head to the shops to start crossing those items off your list.  Of course, this will mean that you are paying about 20% more than the purchase price for your goods, but hey, if you get it on sale, you may just break even.

3.  Roll it into your home loan.

Some big credit card bills look impossible to pay.  Tapping away at them little by little can pay them off if you are disciplined and go back to using cash or debit cards for all of your purchases.  Discipline can be hard though.  Instead, you can roll it into your home loan and be free and clear to run your card up all over again.  Paying 20% on your card as you pay it off over a year looks like a lot of money, but is a lot less than paying 6% on the same amount over the next 25 years on your home loan.  But a shiny new $0 balance on your credit card makes you feel like you're getting ahead even if you are going backwards.

4.  Pay the minimum.

Paying the minimum on a credit card with a $5000  balance puts you in good stead to pay it off in 65 years, with only $20 000 in interest.  But don't think about it and it won't bother you.  That's what minimum payments are for.  They are something to do which ensures you don't have to think about your bill again for another month.  Of course rounding up your payment, even to the nearest $10 can put you well on the road to paying off your card and you don't miss that extra few bucks at all.  But that's not the point.

5. Set up a BPay

They won't let you do future dated direct deposits.  It's a little trick the banks use to try to get you to forget to pay your bill.  That way they get to charge a late fee on top of the interest.  Sneaky hey?  Here's a way you can be sneaky back.  Open a separate bank account.  Put a weekly direct deposit into your new account of the amount you want to pay off on your card.  When the bill comes in, set up a future dated BPay to pay the bill from this account.  This way, you get to pay your bill on time and not have to worry about saving up for it.  As an added bonus, if the amount you pay clears your card to $0 each month, (and you have a card with an interest free period), you get paid interest on the money in your account instead of paying interest on your credit card.  I like having a credit card, the bank pays me interest to use it.

Don't fret about your credit card bill.  Turn your worries into positive expectations by having fun with the bill.  If this is your monthly paper airplane day, then you may even look forward to it each month.

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