We have never carried more than a gold card from the bank for emergencies, car rentals on occasion, internet purchases, and overdrafts (Thank You, debit card! (wife) - I hate the damned thing!!!!) ), and my wife has an airlines card which we use for air travel and large purchases which builds milage, which balance we try to keep low as it has a higher interest rate than the bank card. The "free" milage is great however!
Both currently have zero balances, thanks to recent Alaska Permanent Fund dividends. It pretty much took both of them.... all $6,000 or so.
Now then, about my garage construction....
Nothing wrong with credit cards, just keep them few, and use discipline on both ends of that smokin' plastic. Paid off at the end of every month is best, tho we don't often get there, quite.... We always pay more than minimums.
When the balance gets too big, it takes pain to make it go away- second jobs, no latte's, pizza, Blockbuster, simple, cheap home meals, combine trips to town, cheap wine, etc. Every little bit helps.
If you are semi-underwater, it makes sense to me to pick off the little debts first, paying only mins on the larger ones, regardless of interest rates. This frees up capital so you CAN effectively attack the larger ones over and above the mins. Plus of course the encouragement factor.
If you have any kind of credit history at all beyond credit cards, cut up the ones you have paid off ( you need not cancel them- just get rid of the temptation!), unless their convenience value exceeds the risk- but don't use them again until other debts are under control. Personally I don't see the value in securing credit ratings by having a dozen cards paying mins, over two paid off ones, and an up to date house mortgage/ rental agreement and car payments. (Ours are all paid off, except for the 2003 Dodge Ram 3500 with camper- but the rental apartment is handling that...) A couple good ahead-of-the curve references would seem to me to be as, or more, valuable than half a dozen liabilities that you are only paying minimums on on your credit rating.
Credit unions are often a better way to go than banks....
When we bought our house in '88, it was during a local recession- and we figured we could marginally handle it. We were counting on a 90 day closure because of our schedules- two weeks later the Credit Union told us- "go move in" - apparently our credit rating was PDG! It was a bitch!
We took it on a 30 year mortgage, paid down a bunch of % points (11 to 8, as I recall) with about $10,000 cash, over and above the minimum cash down price, set up a payment schedule of about $200 a month more, and paid it off in 15 years. Well, not quite, as we refinanced some years later at 6.5 %, and took 30,000 equity out to take care of some things, which still only extended our buy out time by 2 or 3 years, at the same payment rate. And we saved about $100,000 in interest (on a $105,000 home) payments over the 30 year mortgage plan.
The point is, don't over-extend yourself, and if you do, bite the bullet until it's under control.
A 30 year mortgage will cost you 3X the purchase price- by adding a few hundred a month, which goes directly to the principal - you can save a third, and be mortgage free in 15- but you still have the option of not paying that little bit extra should chit hit the fan and you need it.
Credit cards should be considered "4-wheel drive". Don't use it to get into trouble- use it to get out of trouble. Or, carefully, for convenience, assuming you can handle it.
