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How I Manage My Credit Card Payments

December 29, 2008 by Lulu in Save Money with 8 Comments

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One of the ways that I save money is to avoid paying fees on credit cards. These fees can come in the form of:

1. late payment fees

2. interest fees for carrying a balance

I used to pay my credit cards in a very strange way that ended up being very time consuming.  I have two credit cards that give me cash back rewards and I used them for ALL purchases and bills.

Old Way

I started off with having a zero balance on the cards to make sure that I did not already have interest pending. I then had regular payments like the rent set to go out on specific days every month so that I did not have to worry about those payments. These payments were set to go out of my Electric Orange account one week after the actual date so that I would have the float time to earn interest on my money but the credit card would still get paid before the due date so that I would not pay interest fees.

I would put items like gas and groceries on the credit cards as well since I could get cash back for making those purchases. I would then log into my ING account every time I made a purchase and send a check for that amount to the card. This was also set to go to the card about one week later, to take advantage of the float.

This method meant that I had a few payments going to each card on numerous days during the week. If you note that I go to WalMart every Sunday to get groceries (I like bananas kind of green instead of riper so I need to buy them every week) then there were at least four payments for groceries going to a card.

It became time consuming (and a bit nerdy) to log in each time to send checks off so I decided to change the way I pay the credit cards.

New Way

I took a look at my zero based budget to get an idea of what I spend on each card every month. I found that with all of my regular payments I spent a certain amount of money on card X and a certain amount on card Y each month.

I then decided to simplify my payments even more. I took the approximate total that I spent on each card every month and divided it into four payments. This total included:

1. fixed payments like rent, internet,  and insurance

2. budgeted amounts like gas, food, and toiletries

I then set up four monthly payments in ING to go out every Monday for those averages. I actually reduced the amount a little bit so that if by the time the final payment needed to go through and I had not spent that much then I would not be overpaying the card.

Both of those cards have the same due date (yippee!!!!) so I only needed to check the balance left on them at time. If they still have a balance on the due date then I would make an online payment to get the card to zero and avoid any finance charges for the month.

Let me illustrate this a bit more clearly. I found that on card X I was spending about $220 a month with both fixed and irregular spending. I set up four automatic payments of $45 each from ING. The fourth payment clears one week before the due date so on the due date I can log in two days before the due date (11th of the month).

If by the due date I had spent less than $220 then the four payments should have it covered. If I had spent more (and gone over budget…which is BAD) then I could just pay the difference in an online payment and have it clear on the due date.

I know it sounds complicated now but I am starting this new style in December 2008 to see how it works out. I know that I will need at least one full cycle to see how efficient it is and see if I need to make any changes.

Since the payments are all handled through ING I can always go back in and edit the monthly payments as needed with a few simple clicks.

Have you changed the way you budget or are you still using the same budget you always have?

I think I get too excited about my budget…well at least Baz seems to think so!

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  1. CraigDecember 29, 2008 at 4:58 pmReply

    The best way to manage credit cards and late fees is to not have any late fees. If you work on setting your budgets straight and try sticking to them as best as possible, you will know what your balance should be approx every month and do your best to pay off all debt.

    • LuLuGalDecember 29, 2008 at 5:12 pmReplyAuthor

      I don’t have late fees Craig. I was just saying that can be ONE of the fees people sometimes occur.

      My credit cards are paid in advance of the due date so I do not get late fees. I am carrying a balance on some cards from past mistakes and from balance transfers on others.

  2. CraigDecember 29, 2008 at 5:21 pmReply

    Ok apologize if I misunderstood. Either way was just adding onto advice for other readers. I only have one credit card and one debit card. Do you recommend getting another? I pay off my debt in full every month. Do I need another one? Not sure if it serves a purpose or not but then why do people tend to have more than one card?

    • LuLuGalDecember 29, 2008 at 5:41 pmReplyAuthor

      I would not ‘recommend’ that you get another card but will tell you why I have more than one.

      First..I started applying for cards in college and then forgot what I applied for and applied for something else…hence my first 4 cards. :-)

      The reason I got other cards was things like the different rewards they offer. I have one card that classifies WalMart as ‘other’ and I don’t get rewards for shopping there. Boo!!!! So I got another card that gives me 3% cash back at Wally and I am happy.

      I have one card that gives 5% on a different set of categories every three months. When it gives rewards on gas then I use to fill up but in the months it does not give rewards for gas then I use the other card.

      I was pretty bad about it with about 8 different cards and all of them being used at the same time. Now I just use Discover and Chase…because of the way they both process various merchants I deal with.

      I think many people have multiple cards because of the different rewards.

      People also get multiple cards because some cards offer a bonus for signing up. (*guilty of doing this !!!!!!!!*) :-)

      I also got a card because it offers a free credit score. You generally have to pay for a credit score so this was a good deal for me.

      If you are satisfied with your card then I see no reason why you should get another one. However if you just want some different rewards or a sign up bonus then you can look at another card.

      • CraigDecember 30, 2008 at 9:57 amReply

        Thanks, after that it seems that if I am to get another card, it would probably be an American Express because they are known to have good reward programs, other than that it doesn’t seem necessary.

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