When to pay cash and when to use a credit card

Consumers might be better off if credit cards had the equivalent of a surgeon general's warning on it; "Warning: Use of Credit Cards may be dangerous to your financial health potentially leading to financial peonage, and bankruptcy". Instead of the warning being by the surgeon general it might be by the federal reserve chairman. The idea here is credit cards are to be used with caution.

There are several reasons why a credit card can be useful however. Since modern economies are very dependent on credit as a source of exchange, it is somewhat undeniable that credit is a financial reality. Credit cards can also protect spenders through credit dispute mechanisms and credit history statements. This financial reality can necessitate the use of credit cards in addition to the following:

• Using credit cards effectively helps build credit ratings
• Bridge financial gaps between paychecks
• Make possible a beneficial opportunity that might not have been available otherwise.

Cash is useful too, and although it is quickly becoming less and less necessary to use cash, it still can be helpful to use cash instead of credit. Moreover, although credit cards are widely accepted and cash is not always necessary, there are specific benefits associated with using cash. Some of those benefits are listed below.

• It doesn't have to be paid back unless it's from a loan.
• Cash spending can keep one on top of a budget by only spending what one has
• It's harder to trace purchases if you like privacy.
• Cash looks good, it's creative, feels nice and is less uniform than plastic. It has aesthetic appeal.

So when should one use cash and when credit? how to distinguish? The concept of a monthly time line can be useful here. By planning a monthly budget one can decide which money will be used for building and maintaining credit and which money might be used to keep one on budget.

Of course not everyone needs to use cash because more advanced budgeters have self-control. In this instance, one may not use cash at all and may even dive into the realm of micro-budgeting. An example of Micro-Budgeting is when one finds a credit card that matches his/her greatest expense to a credit card that provides rewards and incentives for those expenses i.e. airline miles, cash back, discounts, gas rebates etc. This will inevitably lower the cost for that expense making the credit card advantageous if the expense is a necessity and within budget.

The decision of how to fine tune one's use of cash and credit card is up to the individual. Each individual has different spending habits, needs, expectations etc. regarding the use of cash and credit. By considering the above concepts in mind, one may be better navigate the pros and cons of spending with cash and credit cards.

Credit cards: How to Ask For and Get a Lower Rate on Your High Interest Credit Card

It isn't always necessary to use a credit counseling service to negotiate a lower interest rate with a credit card company. Very often the company will negotiate a lower interest rate with their client, especially if bills are paid on time or if one is experiencing financial difficulty. There are several steps of ascending impact that can help an individual lower the monthly finance charges on credit cards. This article will first outlines steps credit card holders can take then illustrate additional methods for lowering interest rates.

• Call the credit card company

Simply calling the company and asking for a lower interest rate may be all that is needed. Keeping the request reasonable i.e. in accordance with one's credit score, and having good reasons for asking for the reduction can be helpful in terms of obtaining a more favorable response from the credit card company. If the credit card is already charging a dramatically high-rate, the benefit of keeping a client's business may be worth a couple of percentage points or more. If the credit company declines the offer, don't worry, there are other methods that may work as well.

• Send a credit negotiation letter

If asking for a reduction in interest rates doesn't work, one may send a more formal written request via a credit negotiation letter. There are many sample 'credit negotiation letters' available on the web that can be used as models and some consumer service organizations allow consumers to freely download and copy their letters for the purpose of interest and other credit negotiations.

• Request to speak with a credit manager or account supervisor

If neither of the above two methods have proven effective after following up with the credit company and/or after a couple of weeks have passed another step may be taken. This next step involves contacting the company again by phone and asking for a credit manager, customer service manager or account supervisor. In a polite, yet firm voice express how the previous steps have had little reception and that one's request is not unreasonable. The customer service manager may be more willing to listen and have more influence in the interest rate reduction process.

• Express Interest in a different credit card company

If the customer service manager still does not accept to lower the rate, ask him or her why. They may respond with reason such as irregular payments, credit risk, market rates etc. Don't be discouraged by such banking lingo. As a client, one's power derives from one's business with the company. If the credit card wants to keep one's business, they may think twice about lowering interest rates. Informing the manager paying bills would be easier with a lower interest rate and that there are several other companies who would gladly accept a balance transfer at a lower rate in return for one's business.

• Credit counseling services

Sometimes, one's credit rating may just be too low, or the negotiation method employed doesn't work, or the credit card company won't negotiate. It's not over yet, but could get a little more complicated at this point. Credit counseling services are skilled with working with credit card companies and can often obtain a lower interest rate for their clients. In some case a 0% interest rate is workable if one is experiencing financial difficulties and is trying to avoid bankruptcy. These credit counseling services are ideally researched well, offer reasonable rates and guarantees.

It is very possible to acquire a lower interest rate on one's credit card. If for some reason none of the above methods work, trying again after a 4-6 months of on time payments will help nullify the credit managers potential complaint about irregular payments and possibly make him or her more amenable to providing the lower interest rate. Acquiring a lower interest rate on one or many credit cards is possible, and is achieved on a daily basis by clients, credit negotiation companies. Utilizing the above steps may greatly empower a credit card holder in obtaining a lower interest rate.

Sources:

1. http://creditfederal.com/debt-negotiation-letter.html
2. http://www.investopedia.com/articles/pf/08/negotiate-credit-card-apr.asp
3. http://www.askmrcreditcard.com/creditcardblog/negotiating-with-your-credit-card-company/