How the Election Will Affect Your Credit Cards
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I don’t know about you, but I’m thrilled the election is over. Sure, I love the excitement of electing a president, but I get so tired of the political ads and the phone calls.
So it’s finally behind us, but now we’re hearing about the fiscal cliff. Honestly, isn’t it amazing how fast we went from election night to hearing about the fiscal cliff? I mean, it was like one minute we’re counting electoral votes and the next minute we’re told to hang on to our hats because we’re on the edge of a cliff.
Anyway, since the election, I’ve been thinking about how the results might impact credit cards. Since Obama got re-elected, I don’t think much will change in regard to how banks behave. Frankly, the banks were already a little on edge because of the prospect of more regulation. So we’re really just status quo in that regard.
I actually think the fiscal cliff thing will have more of an impact in the next few months than the presidential election will. The "fiscal cliff" is a term used to describe the economic fallout that might happen if Washington can’t reach a compromise. I’ll spare you the details, but let’s just say that if Washington doesn’t address the issues by December 31, 2012, it’s predicted that the economic recovery might slow down to a snail’s pace. (See also: Preparing for the Fiscal Cliff)
For the good of the country, I’d like to think the politicians can get it together and make a deal. But really, would it surprise you if they can’t strike a deal even with so much on the line? So that’s why I think that in this post-election stage, it’s a good idea to proceed with caution when it comes to your credit cards.
OK, so here we go. Here are four strategies you should keep in mind in this post-election environment.
1. Don’t Carry a Balance
I know you’re probably tired of hearing this advice because everyone says it. But right now, since there’s some uncertainty in the air, I wouldn’t be surprised if banks attempted some interest rate increases just to cover their own behinds. If you’re paying your balance off every month, rate increases won’t affect you.
But if you routinely carry credit card debt, this can turn into a nightmare if you’re suddenly paying high interest rates. And believe me, I know that some of you need your credit cards just to make ends meet. If this describes your situation, get a credit card with the lowest APR you can qualify for. And when you can, pay more than the minimum payment.
2. Track Your Spending on Your Credit Cards
Unless you have a photographic memory, you really need to have a way to track your spending. Otherwise, you won’t have any idea how much you’ve spent on credit cards.
Unfortunately, I can tell you from personal experience that relying on memory simply doesn’t work. Yes, there was a time when I had an inflated opinion of my ability to remember purchases. Let’s just say that didn’t end well for me. In fact, it went on for months while I worked my tail off to pay off credit card debt.
One way to track it is to use free money management tools. I use Mint, and I get an email when I’m approaching my pre-set limits. You can also set up email or text alerts from your card issuer.
3. Boost Your Credit Score
Having a good credit score helps you save money in many areas of your life. You’ll save on more than just mortgage rates. You’ll also save on less obvious things, such as health and automobile insurance.
Improving your FICO score is a winning strategy no matter what happens with the economy. If it stalls out again, then you want to be in a position to get the best rates on things you need. If the economy improves, you’ll be in position to land a good offer on a credit card.
What do you need to do? Pay all of your bills on time, try not to close old credit card accounts, and keep your credit card balances low.
4. Take Steps to Get Rid of Your Credit Card Debt
I always see a flurry of generous zero percent APR balance transfer offers in January. I think the issuers are hoping folks have made a New Year’s resolution to get out of debt.
Right now, balance transfer offers range from 12 to 18 months. So you could transfer your debt and make payments for a year without paying any interest. A very good deal!
The catch is that the best balance transfer offers require excellent credit, which means you need a FICO score of at least 750. If you don’t qualify for the best deals, then try to pay more than the minimum payments when you can. Throw all your spare cash at your credit card debt. It might seem daunting, but with persistence, you’ll start making a big dent in your debt.