Wednesday, July 11, 2007

Starting fresh...

I think I had previously mentioned that I took out a loan, which I consolidated my credit card debts, and previous loan, along with a little extra to shop around for some central air conditioning, which we've decided to wait out until after season when we will be able to get a better deal.

Anyway, one thing I did was to scrutinize my credit cards and weigh out the pros and cons of each of them. Basically I did like a Clean Sweep kind of thing with my cards. I had four different cards, which isn't too bad really, as many people I know of have a lot more than that. I had a major department store card, a major electronics store card, and two visas, both offering different point incentives.

The Credit Card I had from the major department store is one I've had for many years, and although I do use it the odd time for smaller purchases, I've mostly used it for larger purchases, like appliances or furniture. I've always kept it for this reason, because whenever I've made a larger purchase there, I've deferred the payments to equal payments for so long with no interest, or no payment, no interest for a certain amount of time. At this point though, I've decided to give it up. I figure if some such emergency should ever arise and I need to make a large purchase, I can get another card from them at that point. Another thing I thought of about this decision, is that if somewhere down the road I decide to get another card from this store, they usually offer some sort of sign up incentive when you first apply for their card, like a discount on your first purchase. So that's something to consider for me, especially if my next purchase from them is a large purchase.

I also closed down my credit card from the electronics store as well. Again, the only thing I have ever purchased at this store has been larger purchases -- digital camera, computer, laptop -- and just like the department store, I purchased these items on the deferred payment plan. As it turns out, I found out that the bank I work for offers it's employees interest free loans for computers. So should something happen in the future where I need to purchase a new computer, I'll be getting my financing through work.

Then the decision about the two visa cards. One offers me a dividend on all my charges, which is credited to my account at the end of the year on December's statement. The other gives me points at a nationwide drugstore chain. The dividend card has a higher interest, but it's nice to get that kick back on the statement just before Christmas. On the points card, I have half price interest charges, and this again is due to the fact that I am a bank employee, from where this card is from. Both of these cards had ridiculously high credit lines on them, which while it's nice to have the availability, it's also a bit scary too. As well, this is not always a good idea if you want to apply for any other credit in the future. Reason being is when you're applying for credit, at least here in Canada anyway, banks and creditors will look at your debt to income ratio, and it has to be within a fairly comfortable percentage. I believe that it maxes out at about 35% debt. Now, although you may have a few credit cards that have little or no balance owing on them, that's not what is considered when they are looking at your debt ratio. They look at your total credit line for each card, because in the case that you rack up all your cards to the limits, those would be the payments they would use for calculating your debt. So what I decided to do was to lower both of the credit limits on my visa cards. I've lowered the dividend card to just $1000. I know that's pretty low in today's world, but I use that card for all of my daily expenses -- gas, groceries, and essentials. I want to be able to pay that card off every month, since it has a high interest rate, and I don't want to carry a balance on a high rate like that. For my other card, I've lowered it by $2000., which still gives me a fairly high credit limit, which I'll use only in emergency situations. Because that card has the lower interest rate, it will be better to charge something on it that I may not be able to pay off right away. That way my payments won't be eaten up as badly with interest charges as the other card.

Anyway, this is the scenario I've chose for my own credit needs. While you may not be in the same boat as me, and have the availability of getting interest free loans from the bank, or half price interest, there are still some better deals around than what you may already have. You'd shop around for a new vehicle or insurance for that vehicle. You'd shop around for a pair of jeans to get the perfect fit. So why wouldn't you shop around to get the best credit card that will work for you? It makes perfect sense to me. And credit card companies are always coming up with new deals, so you may want to consider credit card shopping every six months or so, to make sure you can take advantage of the best options.


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