“Anyone who says money isn’t important hasn’t got any.”

The signs are everywhere – it’s not a matter of if anymore but when the coming recession will affect many more North Americans. With record debt levels and the lowest savings rates in history, for some it could be a nasty affair. But I’ve got a few simple tips for you that could help you out – and how to deal with your own use – or should I say, overuse of credit cards. People who are wealthy – and those who have a “money mindset” and are on their way to wealth know that just as they need to be concerned about income, they need to be concerned about debt.

More below:

First, credit card debt is racking up huge profits for banks that issue them. With the prime rate so low right now, yet most credit card companies are still charging 18% or more for outstanding balances. I’m not going to say much about what I think of the banking cartel – other than I do miss true free enterprise competition. But that’s another story for a later time.

And while the banks are charging in excess of 18% on credit card debt, many are still pulling out the plastic to pay for stuff just because on the spur of the moment, you had some spare balance available to you and thought you’d like to have something.

I’m not against credit cards – I have two of them myself. And I’m not against using credit cards either – they can be an amazing tool when used wisely! But when not used wisely, the can wreak havoc on many lives and personal debt rises.

And on top of the rising debt, those interest rates!

If you make the minimum payment each month on your credit card and that is all you make, you will never be out of debt.

If you’re a credit card freak – and you know you are and you just wish there was a way to keep your credit card for REAL emergencies or for purchases that you plan for ahead of time, but know that having it in your wallet or purse is just causing you grief because it is so much of a temptation to pull out – I’ve got a little tip for you.

Freeze that sucker!

Seriously.

Get out the largest freezer plastic zip lock bag you can find. Fill it with water. Stick your credit card in it and toss the thing in the freezer.

When you do this, you still have your credit card. Some people do get overly anxious about simply cutting their credit cards up with scissors – and I can understand that. If a true emergency came up, what would you do?

By sticking your credit card in the freezer in a block of frozen water, you are giving yourself time before making your spontaneous purchases. You can decide while that water is melting, “Do I really need this item? Is it worth it to go into debt for?”

I’ll be the first to admit that there ARE some things it is worth to go into debt for – when you are sure the risk of getting a return on that debt will advance you long term in some way. But even then, there are better ways than an 18% interest rate.

Some other ideas for you to consider:

1. Research credit card companies – some do offer substantially lower interest rates that what your issuer might be giving you.

2. An extra percentage point in order to earn Air Miles or whatever else the reward is, is not worth it if you’re not paying off those balances every month.

3. Ask your banker about a loan of credit. These can often be provided based on your credit history at substantially lower interest rates than your credit card issuer is charging you.

4. If you are VERY disciplined, you can actually use credit cards to your advantage to make money! I’ll warn you ahead of time though: You must be very disciplined and motivated to keep your money to use this system!

Here’s what you do:

1. Prepare an annual budget that you know you can stick to and that is within your present income level.

2. With the figures of the annual budget, break it down monthly.

3. You really don’t generally need to carry around much cash with you except for some petty expenses. So, when you get paid, after taking out what you need for the mortgage, put the rest into the highest daily interest savings account you can find that will also give you a couple of free withdrawals a month from that account.

4. Pay just about everything with your credit card.

5. When the credit card statement comes in, pay the balance IN FULL just before the due date, using the funds in your Savings account.

If you’ve stuck to your budget, what will happen is that instead of paying cash and taking that money out of your account, you are using your credit card while that cash is earning some interest. By paying off the full balance of your credit card on the due date, you are ensuring you don’t have extra debt to pay.

And you get to reap the reward of interest on cash that’s been sitting in your bank account because you’ve leveraged the money belonging to the credit card issuer to pay for your monthly expenses!

But I’ll end with a warning: Do not do this if you are not disciplined enough about money and don’t love your money enough to try to keep it and make it grow. If you can’t stick to your budget using this method, then don’t use this method.

Know your own limitations.

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