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BusinessSense07

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Any suggestions on additions/modifications to my credit card rules?
Sharing with the Credit Karma community--

(Formulated from business/budgeting experience, living through a recession, watching friends suffer with bad decisions and loads of student loan debt (all the while avoiding credit entirely [cash-and-carry]; 15 years of experience all distilled into this common-sense list):

(Yes, I am allergic to debt. It’s not a bad thing. More people in this country should be allergic to debt and prefer savings instead to leverage against both the unforeseen and the known wherever possible. Proper Prior Planning Prevents Poor Performance. This list is mainly geared toward those that are very conscious of the balance between income and expenditures…it takes some of the stress off your shoulders. You’re welcome.)

#1--For any purchases: Pay off at least 50% of charge within 7-14 days (60% is preferred), leave balance to pay down to 50$, then pay off. Do not charge to the card if you do not have the cash reserves (or guaranteed income) to pay off the charge completely in 2 billing cycles (in case unforeseen circumstances arise). Violating this rule leads to leveraging debt to pay expenses. A revolving line of credit is a cushion, not a substitute for hard assets (the trap SO many people fall into).

#2--Budget for purchases, travel expenses, etc. How much is going on the card? Not planning a max amount leads to a larger debt load, a higher debt-to-income ratio (not good), higher credit utilization percentages (also not good), as well as an unpleasant drain on your base of assets. Know your costs, plan accordingly. Maxing out your card without adhering to rule #1 makes you a higher credit risk to lenders, and can lessen your chances at getting approved for pretty much any credit product at favorable rates, or at all.

#3—Ideal 30 day average debt-to-income ratio with all credit accounts is 10-20% (with monthly rental expenses or a mortgage – 30-40%). Going higher than this threshold means your utilization goes up, and/or (more likely) you’re underwater. If your utilization is high for a long period of time, it creates a negative pattern in the [already unfair] scoring models all three bureaus use (lenders don’t like it either when they’re considering you for a loan). Plus, it’s just plain stupid, and it creates needless financial stress; this is not a ratio to take lightly. Read rule #1 again.

#4—If it is financially possible to do so, pay balance off in 30 days (Net 30). Rule #1 makes this possible. When in doubt, if you have the resources; treat it as a trade credit account.

#5—Do NOT use or carry a balance on more than 1 revolving account at a time. This prevents situations discussed in Rule #3 from happening.

#6—Never make a late payment, EVER. Rule #5 helps prevent this from being a possibility. If there’s ever a problem, properly manage the established business relationship you have with your creditor/lender by CALLING THEM, and not being fearful and projecting powerlessness. It’s in their “interest” (pun intentional) to help you, because they’re making money off of you! Do not ever assume yourself to be in a weaker position just because you and/or your company are having a hard time financially. At any RATE (another bad pun), it behooves anyone reading this list of rules to take this advice and burn it into your head: don’t tempt fate—NEVER BE LATE. (Besides, if you have the guile and skill to deal with companies directly on a business-to-business level, it makes far more sense to do that than to pay another company or someone else to do it! Just think: “Client Relationship Management” [being resourceful helps too. Work smarter, not harder; and when hiring outside help to deal with credit bureaus and the like, make sure it’s worth your while to do so from a long-term {planning} perspective]).

#7—Do your RESEARCH before agreeing to anything and also before clicking “Submit Application”; and, realize that despite an agreement on paper, some companies are willing to do some darned distasteful (and borderline illegal) things in order to make money off of you. Look at customer reviews for ANY card you’re considering. Ignore clever advertising. Use your intuition and common sense. If they CAN screw you, usually, they WILL. Be cautious!

#8—Store cards are not very helpful for your credit score, and most (80%, +/- 10 points) have a reputation for poor customer service (such as outsourcing their call centers to another country, for example) and shady business practices; in addition, large portions of the retail/store credit market are managed by only a handful of companies (ever notice how the “bank” is the same for a great deal of stores regardless of the store or brand the card is for?). Approach them with caution. If you're just starting out: Stick with cards from a major bank (perhaps the bank you do business with already if they offer them – MasterCard, Visa), and do not ever do business with institutions or banks that were even remotely involved in the Global Financial Crisis. Read Rule #7 again.

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