“I would like to lower the limits on two of my credit cards from $6,000 to $1,500, and $7,200 to $3,500, but I’m not sure what the repercussions would be.”

“My FICO score, according to my credit union, is currently 762.”

“I read your blog several times per week.  I am happy to report that after many years of struggling, my total debt is less than $10,000 ($8,400 in student loans and $1,475 on a personal loan at my credit union).  I’m on track to be debt free in a little over a year!”

Thanks for being a loyal reader, Emily. Congratulations on your progress – you are on the homestretch now, and will soon enjoy the freedoms of being without debt.

Lowering your credit limit seems to be the responsible thing to do. After all, you are eliminating risk for the card issuer by reducing the amount of potential liability they are exposed to, and you are reducing the potential for you going on a wild spending spree and adding thousands to your debt.

Keep Credit Utilization at 30% or Lower

Unfortunately, the credit scoring gods don’t quite see it that way. One of the major components of your credit score is referred to as “credit utilization.” That is, the percentage of debt you owe in relation to your credit limit.

As an example, if you owed $3,000 on a credit card with a $10,000 limit your credit utilization would be 30%, which most agree is the sweet spot, or at least the upper end of the utilization ratio. Anything higher and it actually drags down your credit score.

If you reduced that $10,000 credit limit to $5,000, but still owed $3,000, your credit utilization would double to 60%. Maintain this level for too long and your FICO score could decline.

If you are concerned with maintaining a good credit score, and 762 is a certainly a good score, it might make sense to wait until you have paid off your balances entirely to reduce your credit limits, or to close a particular credit card account. At that time, consider how much you may be spending on the card each month and ask for a limit roughly 3.5 times that amount (round up to the nearest $500 just to be safe).

Assuming you plan to spend about $500 a month on items you purchase with a credit card (utilities, gas, etc) ask for a limit around $2,000 to ensure you stay under the 30% utilization threshold. If your billing statement cycles and a higher utilization ratio is reported to the credit bureaus, you could see a drop in your credit score, even if you pay off the card’s balance each month.

FICO Scores – Who Needs ‘Em?

Having said all that, a good FICO score is most important only if you plan to borrow again. Sure, credit scores are sometimes used to make employment decisions, and insurers often use credit scores to make underwriting decisions or to set premiums. However, it’s my opinion that we have become way too dependent on credit scores these days.

Make credit decisions that work best for your financial household, not because FICO suggests doing it one way or another. In the long run, you’ll be better off for it.

Thanks again for being a reader, Emily. Best of luck knocking out that remaining debt. Write back and let us know when you are officially debt free.

Ask the readers: Have anything to add for Emily? Have you considered asking issuers to lower your credit limit, despite the impact on your FICO score? Feel free to share in the comments below.

Folks like to talk about earning credit card travel rewards, but sometimes they eat their words when it comes to redeeming travel rewards.

Dave Ramsey says, “75% of airline miles “rewarded” are never redeemed” (Total Money Makeover page 90).  Unfortunately, there is no proof or documentation for us to decide if this is true or not.

However, if it is true, it is troubling.

It’s troubling because people are effectively wasting 75% of their reward earning potential!

Why aren’t consumers using their credit card rewards?

Deals We Like states that  “Nearly 60 percent of consumers will not have enough rewards for a spring getaway.”  So perhaps people are not using their rewards because they are still in the accumulation earning phase. 

However, a second detail from Deals We Like states, “Almost one-third of consumers (29 percent) will have to settle for a “stay-cation” instead as they indicated blackout dates would prevent them from using credit card rewards for a spring trip.”

Consumers aren’t using mileage rewards because they simply cannot find a good way to use them.

What Important Lessons Can We Learn From Unused Airline Mileage Balances?

1. People are earning points and miles with programs they don’t really understand.  If you are going to collect miles (and yes, they can be good), you’ll first need to educate yourself.  You need to know that 1-3 months is often not sufficient enough time to book an award ticket using miles.  Sure, it can be done, but to consistently expect to book flights with miles a month out is unrealistic.  If you don’t know this, you’ll likely be one of the 60 percent that feel disappointed.
2. Your credit card rewards earnings must be focused.  There is no point in starting to collect miles for a flight if you’re not going to finish the process to get enough miles to fly.  When awards start at 25,000 miles, then 20,000 is effectively as good as 0 miles.  Sometimes we have multiple cards in our wallets and don’t know which to use.  The problem is that we earn several partial points and rewards.  Don’t start something you don’t intend to finish.
3. Most people are not willing to put in the effort necessary to use their awards.  This benefits those of us who use our rewards because there is less competition, but I’d rather see you get on the free flight for which you’ve been saving miles.  Award bookings do require time to find the best booking that meets your needs.  If you get stuck, there are people on the web who can help you with your award booking.  Don’t just let your miles expire.
4. Choose your credit card wisely.  Having unused miles means you probably made a mistake when selecting the card.  If you’re not willing to put in the time necessary to book your free flight, then you should stick with cash back credit cards.  I love air miles, but I know they’re not for everyone.  Another option would be to use a points related credit card program that allows you to buy flights using points.  One such program is the Ultimate Rewards program.  The Chase Sapphire Preferred (with a 50,000 point bonus) is a great way to kick start your way to (or get everything you need) for a free flight.   You can use those points for up to $625 worth of travel without blackout dates and the work of an award ticket.
5. People neglect to see the real value in flyer miles.  If you use frequent flyer miles to book international business class seats, you can get over a 5% back value per point.  While cash back and points systems cannot really be stretched beyond their 1-2% value, you can stretch air miles if you book more expensive flights using miles. 

In the end, I think consumers need to be educated and aware.  You need to properly research your card before earning airline miles. 

I’m a big fan of airline miles, but I can tell you that certain programs are junk.  Just like currencies, not all frequent flyer miles are the same.  A guy who has 1,000 Yen doesn’t have as much as someone with 1,000 US dollars.  If you’re going to collect miles and points, be sure you do it with a program that has a solid reputation for both ease of earning and ease of redeeming.

Airline miles credit cards can be a great way to earn credit card rewards, as long as you’re willing to endure a little work during the redemption process.  Otherwise, don’t let your rewards melt away.  Take advantage of a points based card or a cash back card.

Enacted on Oct. 1, 2011, the crux of the new regulation is the distinction between household and individual income. Household income can no longer be considered when analyzing an applicant’s creditworthiness. This change may prevent many stay-at-home parents from being able to open a credit card account.

While I’m not a big fan of credit cards in general, knowing that I probably no longer qualify to open an account in an emergency is a little alarming.The new rule dictates that only the applicant’s individual income may be taken into account by the credit card company when deciding whether to grant credit. So that means that a stay-at-home spouse with no income or only a small income (like me) would probably not qualify, even if the household income is substantial.

For those seeking to establish a credit history, improve a credit score, or gain financial independence, this is a knee-buckling change.The new rule is part of the CARD Act, the Credit Card Accountability Responsibility and Disclosure Act of 2009, discussed in detail in this creditcards.com article. The CARD Act makes the ability to pay off debt the paramount consideration when issuing credit. It is designed, in other words, to protect consumers from themselves. The act’s goal is to prevent cardholders from racking up mountains of debt that they can not repay effectively. Sounds good, right?

Living in a Material World

As we all know, even if you are opposed to making purchases on credit, having a credit card is virtually unavoidable. From simple transactions like renting a DVD or making a car reservation, to major transactions like qualifying for a business loan or a home mortgage, having a credit card is essential.

This change, although intended to protect consumers in general, places stay-at-home spouses at a distinct disadvantage.Imagine the case of a newly divorced or widowed spouse trying to get through the day without a credit card. In many cases, these people may have adequate resources, job skills, and assets to qualify for credit, but without individual credit history, a sudden change in marital circumstances could leave them high and dry, credit-wise.

This amendment also represents a major setback for stores that offer on-the-spot credit with a simple form filled out at the register. No longer will big retailers like Target, Home Depot and Kohl’s be able to offer customers credit cards at the point of sale—and they are not happy about it. While this rule may help curb impulse purchases, for consumers like me, there is a major downside.

Living abroad, I visit the United States a few times a year and normally arrive with a long shopping list in hand. Many items are dramatically cheaper in the States than here in Costa Rica, and other items are simply not available here. Last summer I racked up a big bill at Target, applied for the instant credit card, pocketed the 10% sign-up discount, and then zeroed-out the balance on the next bill cycle. Under the current regulation, I won’t be able to do this unless my husband is with me. Not a nice feeling.

Charging Ahead

If you didn’t apply for your own credit card before the Oct. 1 deadline, all is not lost. There are still several ways for a stay-at-home spouse to obtain a credit card, albeit with restrictions and caveats:

Authorized User: A non-income-generating spouse or child can be added as an authorized user on an existing account without being legally responsible for repayment of debts incurred on the account. The authorized user status does help establish credit history and so this is a workable option for many consumers.

Co-Signer: Just the word “co-signer” conjures up all sorts of credit horror stories, but for some people, it may be the only option. As a co-signer, you are legally responsible for debts incurred, so proceed with caution if you choose this route.

Work It: If a stay-at-home spouse has even a small income from a home-based business or part-time job, this may be sufficient to obtain a credit card with a very low limit. Properly managing a credit card account with a low limit can be a good way to establish credit history.

Hang On: If you have an existing credit card in your name, but anticipate a break in employment for any reason, consider zeroing out the card, but leaving the account open. Once your income ceases, it will be difficult to obtain a new account in your own name—so don’t close that account!

Note: In community property states such as California, Texas and Louisiana, different rules apply that may allow a non-earning spouse to receive credit in his or her own name. On the flip side, non-earning spouses may also be held liable for debts accrued by their partners.

This article was written by contributing author Laurel Gray.

“Credit is a system whereby a person who can’t pay gets another person who can’t pay to guarantee that he can pay.” — Charles Dickens.

I must confess that the past three years I’ve been running my blog off some crappy laptop I bought for $500 in 2008. My laptop finally died on me recently. Normally this wouldn’t be too big of a deal. The reason that it was a colossal problem was that I was in Budapest, Hungary, a country where I don’t speak the language. Did I mention that I earn most of my income off the internet? Yep it totally sucked. I lost my most important files and was worried about how I would access the internet for the duration of the trip. I thought that my life was over.

Sure I could still enjoy cheap drinks and great company. How would I blog without a laptop though?

Then I found a solution. I realized that there was an Apple store in town. Long story short is that I ended up picking up the MacBook Air, a piece of technology that I had fawned over since I first saw it in the store a long time ago.

Now it’s time to finally answer the question in the title. What’s the biggest problem with a credit card?

A credit card will let you buy anything that you want without asking any questions.

Thankfully I had the money in my savings account waiting to be transferred over. If I didn’t have a decent savings account I would’ve been totally screwed. I would’ve been screwed over because my credit card doesn’t ask questions. I bought my Macbook Air without much thought put into it.

That’s not a very wise decision for a personal finance blogger. A personal finance blogger buying a a brand new laptop without planning for it? I’m pretty sure that’s a sin.

Before I go on with this article I want you to know that I’m not one of those anti-credit dudes. I’ve actually been using a credit card since I was 18 and it helped me build my credit to the point that I got a home mortgage at 21. I do believe that there are many issues that need to be resolved when it comes to credit cards and 20-somethings.

If you have a credit card I’m 100% positive that you experienced this before. Your credit card will never ask you any questions. You don’t have to ask for permission. Your credit card won’t ask you if you have the money to pay for this. The store associate won’t ask you how long it’s going to take you to pay off your credit card balance. There are no questions asked. As long as you stay below your credit limit you can have anything that your heart desires.

You can have anything that you want without having to answer any questions.

What’s my solution for this problem? What’s my quick way for dealing with the biggest problem with a credit card?

Before every purchase that you make with your credit card ask yourself the following questions:

1. Do I really need this right now? Can I wait another few weeks to make this purchase?

2. How will I pay for this?

I guarantee you that just the time that it takes you to remember these questions will be enough to start second guessing yourself. Once you ask yourself the questions that your credit card won’t ask, you’ll realize that you’re making the wrong choice. You might even realize that you have other stuff you would much rather save up for. I personally try to save all of my money for trips. Going out in town or buying a new pair of shoes is alright. Going on a trip a few times per year, well, that’s how I want to live life for the next little while.

Have you experienced this with a credit card? Have you ever gotten carried away just because your credit card doesn’t ask you any questions?

If you want to follow Martin on his journey you can sign up for his exclusive newsletter, which happens to come with a free gift. The gift is a case study conducted with internet entrepreneur, a dude earning a killing online every month

Bungling Balance Transfers

Moving debt from a high-interest-rate card to one with a low introductory rate can make financial sense–but only if you read the fine print. If you ignore or misunderstand balance-transfer rules, you could end up owing even more.

Boy have I screwed up in this area over the years. My first experience transferring credit card balances came in my early 20s. I managed to accumulate some credit card debt in college by using my card for emergencies like late night pizza runs, t-shirt sales at the bookstore – you know, the bare essentials.

One day, I received in the mail an offer to transfer my balance at 0% interest by opening a new account. Well that seemed like a no-brainer!

Unfortunately, I didn’t read the fine print and see there was a balance transfer fee of 3% of the transaction, which negated a good bit of my interest savings. I also made a critical mistake by leaving the old credit card account open, and when the next “emergency” hit I swiped the card again. Now I owed balances on two cards. Ouch

Ignoring Monthly Statements

Reading your bill can also help you understand how long it will take to pay off  your debt. As mentioned earlier, the length of time required to retire your balance by making minimum payments is displayed, as is how much you would need to pay each month in order to pay off your balance in three years. These numbers could act as a wake-up call for you to increase your monthly payments.

I like to say I used to behave like a financial ostrich, burying my head in the sand instead of facing my debt head-on. The very first step towards getting out of debt is to take inventory of where you stand. Obviously, it’s hard to do that if you ignore your statements.

You’ve probably noticed this in other people, or yourself, but it seems like very few people can tell you how much you owe. I used to say, “I owe a few thousand” and I hear others say, “I guess I owe around $10,000″ (when they actually owe more like $13,500). To put together a good plan to get out of debt, you have to first know what you’re facing.

There are other good reasons to check your credit card statements, even if you regularly pay yours off every month (as I now do).

Mistakes happen. A merchant may inadvertently charge you twice for the same transaction. Issuers have also been known to get their wires crossed and post a charge to the wrong account if a batch processing file gets scrambled.

Fraud happens. The waiter that took your card last month at your favorite restaurant might have given himself a $111 tip instead of an $11 tip by simply adding a “1″ to the front of your tip total on the receipt. Trust me, it happens. I used to see these kinds of things all the time when I worked in a credit card fraud and disputes area.

For more tips, be sure to check out the full article at Kiplinger.com.

Debit Cards—The Pros

A debit card withdraws funds directly from your bank account, which encourages responsible spending. You see your ledger account balance declining with each purchase, which offers an accurate (or sobering) picture of your spending habits.

Debit Cards—The Cons

If you do not keep a weather eye on your balance, you might overdraw your account. Most banks offer “overdraft protection” for debit card accounts, but this “protection” might come laden with interest charges and onerous fees. Be sure to read the fine print on your debit card agreement so you are aware of the bank’s policies on overdrafts.

Credit Cards—The Pros

If you are responsible in your use of credit cards—which means spending within your means and paying off credit cards completely each month—they can be better than debit cards in a few ways.

First, a credit card allows you to spend money you don’t have. I know this may sound like a slippery slope…but within reason, it’s justifiable. For example, if a major appliance is on sale early in the month, but you won’t be paid until the 15th, you can take advantage of the sale by using the bank’s money for the purchase. As long as you intend to pay off the balance at the end of the month, you come out ahead.

Second, many credit cards have great rewards programs. You can funnel all your expenses through your credit card, amassing loads of points that can be used for airline travel, free hotel stays, discount programs, or cash-back plans. As long as you still pay off your bill at the end of the month, you reap the rewards without losing anything.

Note, some excellect reward debit card programs are cropping up now, too.

Third, credit cards offer superior consumer protection. If your credit card is stolen, in most instances you will not be held responsible for the charges, save the first $50 (most issuers don’t even charge customers for this).

Read more on what to do if your credit card is stolen.

If you have a dispute with a vendor, the credit card company can withhold payment and mediate the complaint. This service is backed by Federal law, which empowers the credit card holder. Don’t recognize charges on your current credit card statement – here’s how to dispute a credit card charge.

When renting a car, many credit cards offer coverage for collision, loss of use, and towing charges. This can save you a bundle on car rental fees—just be sure to review the credit card company’s policy before declining or buying rental car insurance.

Credit Cards—The Cons

We are all familiar with stories of individuals and families struggling to overcome crushing credit card debt. We piled up a bit of debt ourselves a few years ago on excessive shopping, school tuition and related expenses.Fortunately, we kept our noses to the grindstone for a couple years and paid off our credit card and school debt.

Used irresponsibly, a credit card can blow up in your face like a personal finance grenade. Credit cards with high interest rates can turn inflate the costs of your purchases significantly as you pay for them over an extended period.

Be aware that credit card companies can raise your interest rate after your card has been issued. This practice has been reigned in somewhat by legislation enacted in mid-2010, but if you are late or miss a payment, the card issuer still has the ability to sock it to you. Check your monthly statements carefully to make sure your rate has not changed.

Self-Awareness Is the Key

Take an honest assessment of your spending habits, and then determine which card is best for you. In many cases a combination of credit and debit cards is the wisest choice, to maximize the benefits of each.

I have about $2,000 on a credit card and I have about $5,000 saved for an emergency fund. Would you recommend taking out the two grand out of savings and paying off the card? I know that is probably a dumb question, but maybe I just need reassurance from a third party.

I should add that I own my own business and this year has started off worse than last year, so that is why I am a bit more nervous about taking it out of the savings. Also, what goes on the card are usually business expenses that really need to be bought. Kind of a difficult situation, and I think that I will just have to figure out how to not put anything on the card, and figure out how to lower my overhead in my business.

Eric, in just two paragraphs you’ve summed up a predicament many business owners find themselves in. Using your credit card to cover business expenses is not necessarily a bad thing, as long as revenues can cover those expenses, and allow you to pay off the card in full each month.

When your business credit card balance begins to grow, I start getting nervous because it is a very slippery slope to finding yourself deep in debt. It sounds like you are already looking for ways to reduce your expenses, and that is definitely a great first step.

In this scenario, I would not use savings to pay off the credit card, because it would wipe out 40% of your emergency fund. Instead, I would drastically reduce business expenses and use all business earnings over the next few months to eliminate your credit card balance. You may pay a little more interest, but preserving your emergency fund should be a priority in tough times.

In the mean time, I would consider moving to a cash-basis for purchasing supplies – even if you had to set aside $1,000 or so from your emergency fund as a buffer in your business checking account. Once the credit card is paid off, continue to keep expenses low and build up a business emergency fund representing six months of business expenses. Keep this money separate from your personal emergency fund (which should represent 6 months of personal/household expenses). Think of it as your own business line of credit for lean times.

With your business emergency fund in place, and your credit card debt paid off, you’ll be in a much better position to resume investing in your business again. If you decide to resume making purchases with your credit card, be sure to pay off the balance in full, and stop using it immediately if revenues drop off and you are unable to pay the card balance.

I hope things improve and you are able to hang on to your business. As an entrepreneur myself, I am well aware of the passion and energy business owners pour into their endeavor. Sometimes that dedication blinds us to the fact our business isn’t doing too hot, and we look for creative ways to keep it funded (such as turning to credit cards, home equity and small business loans). I admire you for tackling your debt before it became a big problem, and I suspect you can clean this up rather quickly and move on to enjoy future success.

Ask the Reader: What additional advice do you have for Eric? Do you agree or disagree with the advice I gave?

I came across your web site today and I love it!  My husband was out of work for nearly 2 years.  We always had enough money to pay our bills so our credit line was very high.  Well, I used it, all of it.  I paid the phone, the car, taxes, one credit card paid another and so on.  I know I broke every cardinal rule but I did what I had to survive.

My husband is now working.  We are paying the mortgage company every week $500.00 to catch up.  My credit cards are over $80,000.00.

Here is my question…Now that we are getting back on our feet, how do we square up with the credit cards with out ending up in the same position?  I can give them each (all ten of them) 40.00 a month, but that won’t make a dent and I don’t even think they will take that low of an amount.

Laura, thank you for taking the time to share your story. It sounds like you and your husband have had a rough couple years, financially, but there will be brighter days ahead. My first piece of advice has little to do with finances, and more with your relationship with your husband.

I want to encourage you to fully disclose your financial situation to your husband. Perhaps you have already done so, but in your email you indicated “I used it, all of it. I paid the phone, the car, taxes…” I just want to make sure you and your husband understand the situation fully, and understand that while you did what you had to survive, we must now work together to clean it up.

Kudos to you for working to get the mortgage caught up, and for making that a top priority. So many times people in your situation make payments to credit cards before the mortgage payment because some obnoxious credit card collector is breathing down their neck. Prioritize the income you now have coming in putting things like food, shelter, lights, and transportation at the top. You’ll work around to the credit cards when you can, but those things must be paid first.

Consolidate Your Accounts

With ten credit cards you do have an uphill battle, but paying them off is not impossible. You didn’t share exact numbers/balances with me, but I understand your current budget only allows for $400 to go towards repaying the credit cards (hopefully you’ll have even more once the mortgage is caught up).

Spread across 10 cards, that $400 budget only leaves $40 per card. You might consider a consolidation loan with Lending Club to reduce the number of accounts (and minimum payments) you are required to pay each month. Also consider this 18 month promotional balance transfer offer from Discover® More Card.

If you can successfully consolidate your accounts, but sure to close or tear up the cards of those that are paid off. Else you may revert back to old habits and begin using them again.

Sell Stuff to Raise Cash for an Emergency Fund

It would be great if you could build up a small emergency fund of a couple thousand dollars before starting your debt repayment plan. I worry the next emergency will lead you back to credit cards, and zap any progress you’ve made towards paying them off.

Do you have anything you could sell to fund this emergency fund? An extra vehicle? Old jewelry you no longer wear, but may have cash value? Appliances? Electronics? Consider hosting a yard sale or two. I’m not advocating you sell all the contents of your home, but this step will require an extreme measure or two to get an emergency fund in place.

The Debt Snowball

Here’s my advice for handling the remaining credit cards. Start with the traditional debt snowball. List your cards smallest to largest according to their current balance. The standard advice here is to pay the minimums on all accounts to keep them current, and pay anything extra on the smallest debt. In your situation, I’m not sure that’s possible, considering the sum of all minimum payments is likely much higher than $400.

I’d advise you to consider making a substantial payment – at least a couple hundred dollars – on the account with the lowest balance. Use any remaining funds to pay minimums on the next card or two. Hopefully, that card with the lowest balance can be paid off within a couple months, and when it is, walk that money right up the debt snowball to the account with the next lowest debt, and so on. The guys at the end of the list will probably be kicking and screaming for payments, but if you can’t get to them, you just can’t get to them.

Increase Your Income

While working this debt snowball, it would be great if you could find creative ways to increase your income. Perhaps you or your husband could work some overtime or a part-time job, or work from home in off hours. As you acknowledged, you are in a pretty big hole, so increasing the size of your shovel would certainly help get out of credit card debt that much faster!

I wish you and your husband the best on your journey to debt freedom. It will be a long road, but as someone who has just recently experienced debt freedom, I can tell you that every sacrifice is completely worth it!

Ask the Readers: Do you have any additional advice for Laura? Words of encouragement?

To simplify things, we decided to use our Amex Blue card to hold all recurring, monthly charges, such as utility payments, subscriptions, etc. The benefit of this plan is two-fold.

First, it makes managing our primary checking account much easier. No longer do we have to reconcile five or six utility payments plus a number of subscriptions (Netflix, Onstar, etc.) to our checking account ledger. We simply write one payment to pay off the American Express Blue card and record it in our checking account.

Another benefit of charging all of our recurring expenses onto a single credit card is that I am able to get a consolidated view of our monthly outgo, grouped by category (more on that in a moment). I can even analyze total expenditures in each category over time online.

Sure, I could do the same thing using personal finance software, but this way I don’t have to download any transactions from multiple sources, or share any login information, making this a one-stop, secure shop to viewing our expenses.

American Express Blue Card Review

Customer Service/Website Interface I’ve never had a problem with Amex customer service, and their interface recently added some features that I’ve come to enjoy. Members may “tag” transactions using user-defined categories and view a number of reports/views based on those groupings. So far, I’ve grouped transactions by Monthly Bills and Vacation (we use this card for reservations and travel expenses). I can graph those categories over a specified time to track spending, and even pay a particularl “bucket” of my balance from a separate account (paying for vacation out of our vacation fund, for instance).

An example of the “transaction tag” I referred to above attached to my Netflix subscription fee. Notice the “Monthly Bills” designation under my Netflix charge. At the end of the month, I sum up this category to determine my monthly, recurring charges.

Competitive Rate While I plan to pay off our American Express Blue card every month, it’s nice to have a competitve interest rate on your card just in case you need to stretch your payments across a couple billing cycles. Blue comes with that flexibility to pay over time, and a 0% introductory APR for 6 months.

Rewards Program A rewards program is not what really sells me on a credit card product. After all, most programs would require thousands of dollars in spending to earn a modest reward. However, if a credit card issuer is offering to give me points just for using their product, I’ll take them!

With the Amex Blue card you earn 1 point for every eligible dollar, 2X points at the American Express Travel website, and 2X – 10X when you make purchases with select partners. Rewards are available in a variety of categories such as travel, gift cards, cash, merchandise and entertainment.

No Annual Fee – A number of Amex products (and others) have outrageous annual fees. I simply refuse to pay a fee for the privilege of charging items to the card. My Amex Blue card has a $0 annual fee.

Additional Benefits I’m Not Likely to Use, but are Nice to Have

Extended Warranty American Express extends the manufacturer warranty for purchases made using your Amex Blue Card.

Purchase Protection Eligible purchases made with the Amex card are protected against accidental damage and theft for up to 90 days from the date of purchase.

One of the most difficult parts of getting out of debt is transitioning from a spender to a saver. I’ll be honest with you. My wife and I loved to spend money. I loved it so much that I racked up over $16,000 in credit card debt over a period of a few years. That $16,000 doesn’t even include all of the other things that I bought on my credit card that I paid off at some point. For my wife and me, going from spenders to savers has been a little more difficult than you would think.

Our Spending Years

My wife and I have been working since an early age. I started working odd jobs in the neighborhood when I was about 12. I would mow peoples lawns, clean out their garages, etc. It earned me a few bucks to play around with. Sure, I saved some money here and there, but as soon as those savings hit a threshold, I spent it. Due to my spending, things began to pile up in my room. I had new video games, a cell phone, CDs, and all the new electronics. Life was good and I had plenty of things to show for it.

As the years went on, I got real jobs that paid me a little more than the neighbor down the street. That money helped me get a car, pay for gas, and take my future wife out on dates. Then came college and the dreaded first credit card. Man did I love that piece of plastic. I mean, they only gave me a $500 credit limit. What could go wrong? Well, as you can guess, I got more cards and higher credit limits. I was buying new computers, clothes and every new cell phone that came out (can you tell I like electronics?). Oh the days of spending…..

My wife started working at 15. I can still remember picking her up at the local fast food joint smelling like deep fried goodness. She spent her money on clothes and loved doing it in the process. It was her weakness and she knew it. Being the first born child, she didn’t get the hand-me-down clothes like her sister (who made out like a bandit if you ask me). My wife wanted to look good and she spent her money on clothes to do it. She never really racked up any major credit card debt (she mostly used cash). The most credit card debt she had was a few thousand dollars worth and it was all school supplies (she was in a major that required additional things). She loved knowing that her money was hers and she could do what she wanted with it. Oh the days of spending…..

Time to Shred the Cards

Even before we said “I do”, we knew financial trouble was on the horizon if we didn’t do something. We sat down, came up with a game plan, and wrote down our goals. The first thing to go was our credit cards. Let me tell you something, shredding something that has been in your life for almost 7 years is tough. Knowing that we couldn’t buy anything on a whim was even tougher. Here are a few things that we did to help ease the pain:

1. We Wrote Down Our Goals and Came Up With a Game Plan

Like I mentioned above, we sat down and had a deep discussion about our financial future. We talked about what we wanted out of life and how we were going to achieve that while not adding to our debt. It was a difficult night, but we came out of it stronger financially and as a couple.

2. We Set Up a Budget

This was one of the harder things in the process. Before we got married we were free spenders. Sure we made sure we didn’t overdraft our accounts, but we spent our money on what we wanted. In the budget, we spent every dollar on paper and stuck to it. Sure there are times when we veer of the path somewhat, but we correct it and move on.

3. We Didn’t Cut Out Everything

When most people think about budgeting, they think about cutting everything down to the bare minimum. Well, we just couldn’t do that. We would go crazy and knew it would end up hurting us in the long run (by causing us to revert back to our old ways). So in our written plan, we budget for things such as eating out once or twice a month. I mean, sometimes you just need to get out of the house and interact with people or spend some romantic time with your spouse. We also budget about $50 a month to spend on clothes. The budget actually helps my wife think long and hard about what she is buying. Before, she just bought what she wanted when she wanted it. Having the budget changes that.

Well, there you have it. That’s how we transitioned from spenders to savers. Let me just say that it was hard and still continues to be today.

How did you handle your transition? Was it easy, hard?