With the credit crisis that started in 2008, many folks who have credit card debt now realize that they should eliminate them as quickly as possible. For today’s post, I interviewed LuLuGal from How I Save Money, who got into credit card debt and used a variety of means to chip away at her debt. There is a lot you can learn from her experience. You should consider subscribing to her blog.

1. How much credit card debt do you have right now?

I have $4464 in total outstanding credit card debt right now with $1566 at 0% from my LASIK surgery and the balance at 7%.

2. How did you amass this debt?

As I mentioned before part of that debt was from having LASIK surgery to correct my terrible vision. The rest of the debt, which used to be much higher was as a result of stupid purchases when I was just starting out using cards in college. I did not know what I was doing and would not pay the balance in full so I incurred interest charges. Then I decided to go back to school after a series of bad jobs and used the cards to pay for college.

3. You mentioned in your blog that you use autopay with your ING account and your credit cards. Can you explain how it has worked out for you and if there are any traps to watch out for when you do that?

I put all bills that I possibly can on my Discover card and then use a Chase card to pay for groceries and gas. I then divide my budgeted amount by four and have ING send out a payment every Monday to one of those cards. I check the balance one time the week before the due date and make a payment if there is something that pushed the budgeted amount over. This way I don’t have to worry about the due dates or the minimum balance because the cards get paid every week so my payments should not be late.
Also since I am paying the budgeted amount, say $70 for gas then if I only actually spend less, say $65 then I should not have a balance to pay when the statement is due. You can read my budgeting and credit card management posts on the blog for more details.

4. You have done a few balance transfers to get lower rates. Can you highlight the episodes and lessons you have learned? How should one go about dong balance transfers properly?

I am not an expert on the balance transfer game and right now credit card companies are making it more and more difficult for consumers to get good deals on balance transfers. I think the most important things to look for are the interest rate being offered and the transaction fees.

If you get an offer that gives you 0% interest then you need to look at the transaction fees. If the fees are higher than the rate you could get in your savings account then you might not want to take that offer. Some cards also offer transfers with no transactions fees but the rates are high and those are also not a good deal for consumers.

Calculate how much you would get charged in both fees and interest rate for the period of the transfer and see if it makes sense for you. Write down the date the money is to be paid off in full and see how much you would need to pay each month to achieve that goal.

5. What cards do you have and do you have any favorites?

My two favorite cards right now are Discover because I can get CVS gift cards with the rewards and Chase because I can get a bonus with the rewards.

6. Can you describe your experience with the lending club both as a borrower and lender?

Oh I loved Lending Club because it really took a weight off me financially. I borrowed from them and got a much better rate than what was on one credit card from college and I was able to pay off the lending club loan in one year and save a LOT of money in interest charges.

As a borrower I have not put much money into the site but I am pleased with the results so far. I had one loan go into default but since I only invested $25 (the minimum) I was not financially crippled by it. I had one person pay off the loan early and while that was a potential loss in interest income, it was still good because it meant I got my full $25 back and can now reinvest with someone else.

7. What are some of your favorite money saving tips?

My favorite tip before you can even start to save money is to BUDGET. Writing down where your money goes makes you see the places you can cut back to save money so make a budget first and then you can move on from there.

1. Use coupons. They come for a small price in the Sunday paper but in the end they do save you a lot.

2. Use a rewards card. This requires a lot of discipline but if you use a rewards credit card you earn cash back on all your purchases.

3. Plan!!! Make a shopping list and check your pantry against it so that you don’t go out and buy things you already have because you could not find them in the dark recesses of the kitchen.

8. What advice would you give to college students with regards to managing finances and credit cards?

First as I mentioned above, start a budget. You can do a simple one in Excel or in Google
documents and track your spending for one month. You might be surprised at what you find out. Use an online account like….ING!!! It helps you track your money better and you can earn interest on checking as well. Any online account will do but you just need to find one that works for you.

Make lists and stick to them. Buy what you can afford, regardless of what others around you are doing. Try generic and buy it if you like it. I remember I would only drink carnation milk until one day I tried the Great Value store brand. It tastes the same and has the same nutrients so out went the pricey milk. I still only use Oil of Olay on my face because I have sensitive skin but I am making the sacrifice with the milk.

When it comes to credit cards make sure you pay the card in full every month. Better to pay a few dollars more than the minimum payment twice a month than to pay late or pay nothing at all. It takes discipline to use credit cards so start small.

This entry was posted on Friday, August 21st, 2009 at 07:00 and is filed under Radio Shows & Interviews. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.