Archive for the ‘Credit Cards’ category

What should I pay off first?

September 3rd, 2010
Credit cards
Image via Wikipedia Question: As a recent college graduate, I’ve incurred a number of student loans, credit card debt, and a car payment.  After budgeting for my monthly expenses, I’ve found that I have some extra money that I can use to pay off some of my debt.  Where is the best place to start?

My Answer:

I encourage my clients to have no debt because I believe that debt and unconscious spending steal our dreams.

I suggest you begin by taking the extra money you have in your budget and building a $1000 emergency fund so that you have the ability to handle small emergencies.

Once you have your $1000 emergency fund, organize your debts from smallest amount to largest; either on paper or in a spreadsheet.

Take any available money you have and pay down the smallest balance debt.

Once you finish with the first debt take what you were paying on that debt and add it to the minimum payment of the next largest debt – keep that up until you are out of debt.

You’ll find that getting fewer bills in the mail will reduce stress and seeing real progress will keep you motivated.

You are at an ideal time in your life to get out of debt and stay out of debt so that you can work towards living your dreams.

Good Luck,


This was a great question asked on Mint.comsee my answer and other in the Mint Answers section.

Personal finance coach, Matt Kelly, lives in Durango, CO.  He blogs here at and writes a monthly newspaper column called Money Savvy.

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Don’t borrow from your 401(k)

August 31st, 2010
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Borrowing from your 401(k) is not advisable. Because if you quit or lose your job, you’ll likely have to repay the loan within three months – see your tax adviser to know for sure. If you aren’t able to do that, you’ll owe income taxes on the money, plus a 10 percent penalty if you’re under 59-1/2.

A better strategy is to consider selling things you own to raise the money to pay off your debt.  Also, consider selling anything, except your home, that will take more than 18 months to pay off.

Durango, CO resident and personal finance coach Matt Kelly owns Momentum: Personal Finance.

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Unlimited student loans = tuition inflation

August 30th, 2010
Sorority Crest
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Why is college tuition rising faster than inflation?

Because colleges and universities can charge more when students and parents are willing to take loans to pay the tuition.

On average tuition is going up at a rate of about 8% per year. Like the housing market before the bubble burst…easy money means higher prices. And a lifetime of student loan payments just isn’t worth it.

Student loan debt has officially surpassed credit card debt.  One of the reasons may be that you cannot declare bankruptcy on student loans.

My advice, go to the best college or university that you can afford to pay cash for the tuition and living expenses.  And even if you can afford to pay cash for an expensive school consider a less expensive one because the Ivies just aren’t worth it.

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Are you smarter than a fourth grader?

August 29th, 2010
Airline Ticket of Northwest Airlines
Image via Wikipedia

This morning when watching TV with my nine year-old son an American Express commercial came on.  This prompted him to ask me about the reward points they were promoting.

His question was, “How much is a point worth?”  Good question, and one I’m not sure most credit card users ask themselves.

On face value the question is a simple mathematical equation:

Points Required to Redeem Reward/Retail Price of the Reward = Point Currency

Let’s look at the cost of a FREE airline ticket purchased with reward points.  The average domestic airfare in the first quarter of 2010 is $328.00. Let’s say that you can get an airline ticket for 25,000 points – this assumes that you didn’t need to use a “rule buster” that costs 50,000 miles.

Based upon our equation, 25000 points/$328 = 76.22 points per dollar.

Since points are earned for each dollar charged on a rewards credit card this means that you must charge $76.22 for each dollar that you can use towards the “free ticket”.

Because we know the typical consumer spends between 12% and 30% more when they pay by credit card we can calculate the real cost of this $328 ticket.

If you were spending 20% more and you charged $25,000 over a year – so you can get the “free ticket” – the true cost of they ticket is $25,000 x .2 = $5,000.

Want to buy a $328 ticket for $5,000?  I didn’t think so – after all you’re smarter than a 4th grader…right?

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FICO Score: Your I love debt score

August 26th, 2010
Visa Debit logo
Image via Wikipedia

Financial institutions and lenders are marketing debt. Why?  Because they make lots of money when you are in debt.

Don’t believe me that they are marketing debt?  Check out these three examples:

  1. Credit has become a media topic. Take for example this CNN Money article, 6 steps to improve your credit score and it’s accompanying graph about how to get the perfect credit score so that you can get the best rates on homes, autos and credit cards.
  2. Visa commercials telling you not to pay with cash because it slows life down.
  3. Look at your mailbox and how many pre-approved credit card offers are crammed in there every week.

So what can you do?

  1. Don’t believe that your “I Love Debt Score” (FICO Score) means anything about who you are as a person.
  2. Stop believing the lie that credit is better than cash.
  3. Stop the unsolicited credit card offers by calling 1-888-5-OPTOUT (567-8688) or visit for more information.
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