How To Use Charge Cards Wisely

Using Charge Cards Wisely

Too many people think that a charge card is a "license to charge"--a license to go deeper into debt.

The middle class have been educated by the media to want all the good things in life. "You deserve the very best." A charge card is the easy way to live the good life today.

The fact is the average person has $6,000 to $7,000 in charge card debt. Many people have $10,000 or $20,000, or even more, in credit card debt. Credit card debt has the highest interest rate of any debt short of a loan shark.

While there are emergencies, wise use of charge cards suggest that you pay off your outstanding balance monthly, or at least several times a year.

How to Spend Money Wisely

In his book Rich Dad Poor Dad Robert T. Kiyosaki shows what the poor, middle class, and the rich buy on payday.

The middle class buy liabilities. They buy a bigger home, new cars, big screen TVs, club memberships. These purchases are all too often made on credit. They create a monthly mortgage payment, monthly credit card payments, monthly membership payments. As the middle class make more money they reason that they can buy more goods and services on credit.

The result is that they always feel their income is never enough. Every time they get a raise they buy more expensive items on credit. This never ending cycle of increasing income and increasing debt payments is called the "rat race".

The rich discipline themselves to avoid instant gratification. Instead of purchasing liabilities, they purchase assets. They continue to accumulate assets because assets produce a cash flow.

As you accumulate assets your cash flow will increase. When your cash flow exceeds your income from your job, you have bought your personal financial freedom.

Read the details of how you must transform your thinking to really spend your money wisely. Read Rich Dad Poor Dad.

Credit Report Scores - Computing Then

Your credit report scores are based on factors that appear in your credit reports:

• Bill payment history (Good: on time and for the full amount)
• Total outstanding debt (Good: non-mortgage loan payments less than 5% of gross income)
• Types of debt (Good: mortgage, car loans, Bad: high credit card debt)
• Length of credit history (Good: 3 or more years of on time payments)
• Credit inqueries (Bad: many rejected applications)

The Equal Credit Opportunity Act (ECOA) prohibits certain factors from being used in determining your credit report score:

• Personal details such as sex, marital status, age, race, national origin, or because you receive public assistance income
• Sources of income such as regular alimony, child support, or separate maintenance payments

The Equal Credit Opportunity Act provides actions for you to take if suspect unauthorized factors are being used to deny you credit.

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