🔥 ^{Hot off the press: Here’s what’s burning up our news feed.} 🔥

• More into video? — Visit our New YouTube Channel

• This credit card thing is getting out of hand

• 3 alternatives to using your credit cards

• How many cards are too many & which should you prioritize?

Let’s Chop It Up…

🏖️ Summer Series 🏖️

Summer Spending Refresh: The Credit Card Issue

I have not been able to read any stint of news without being completely bombarded with “Credit card debt soars” or “Credit cards are evil”. (Yes someone actually said that).

This issue of our Salt & Pepper Finance newsletter is all about credit cards and credit card DEBT, namely, how to avoid it.

The Problem(s)

In my opinion, there are several issues at play here, unfortunately, they are all feeding one another and making a huge financial mess for the average consumer.

1. Self-control: Let’s take a moment to do a reality check — no one HAS to rack up debt. It is a choice, always. If you don’t believe that, then you’re likely your own problem (not that little piece of plastic in your wallet).

2. Inflation: Everything is expensive right now. Enough said.

3. Interest: Borrowing money is also expensive. Especially on credit (~20%-25% currently). This isn’t anything new, but it is ballooning which makes the sting a bit worse.

The Solutions

Obviously, we could sit here and pretend like life doesn’t happen but since it can and will, safety nets (the cash kind) should always be the first priority. But when that isn’t an option, consumers like to be quick to pull out their credit cards as a form of an escape route.

But there are other options to consider.

Let’s break these down.

1️⃣ Use This Not That: The 3 Best Alternatives to Credit Card Debt

I found such humor in reading “Credit cards are evil…” on my scrolling journey this week. But the more I thought about it, the more pity I felt for whoever actually felt that way.

We have paid for whole vacations on the backs of credit card rewards alone. With little effort involved. How? — We use them as a tool.

Because that’s all they are. And just like with all tools, they can make your job easier or they can seriously ruin a project.

The Current State of Credit Cards

As of publishing this, credit card debt is a slippery slope. If you can’t afford to pay off your balance in full each month you may be better off utilizing another option.

Option 2: Buy-Now-Pay-Later (BNPL)

I have a deep love/hate relationship with BNPL. But desperate times call for low-fee and low-interest financing. If you live under a rock, BNPL allows you to purchase goods/products and pay them back over time, typically with no interest. Some popular services include:

• Klarna

• Affirm

• Afterpay

Option 3: Personal Loans

Personal loans come in a close second. And while we love that loans come with a bit more barrier to entry (so you can’t just spend like crazy) they also come at a price. Credit checks.

Credit checks are annoying in the sense that you’re penalized for too many. And they take two years to come off.

But the interest and payment terms on a personal loan are more forgiving than credit cards. So if you’re trying to finance a large necessary purchase, this is an option to be considered.

🔑 Salt’s Key Takeaways

Remember, credit cards are tools, not tormentors. Use them wisely, or they could lead to a serious financial mess. If you're sliding down that slippery slope of credit card debt, cash or Buy-Now-Pay-Later schemes might just be your lifeline. However, they are kind of like eating broccoli instead of a burger – not the most delicious option, but it'll keep your financial health in check.

Personal loans? They come with their own set of pros and cons, but if used judiciously, they could be the better bet for larger, necessary purchases. They require a little more paperwork but could save you a good chunk in the long run.

The bottom line? Understand your financial options, weigh up the risks, and make informed decisions. Your money should be working for you, not the other way around!

2️⃣ How Many Credit Cards Are Too Many?

Short answer—anything over 3 is a bit of overkill.

🤔Think about it:

1. You want one with high cash back for your everyday purchases (1.5%+ should be your aim)

2. You want another for travel (if you do that a lot, otherwise it’s usually not worth the annual fee)

3. Another high cash-back card for a specified spending category (groceries, gas, Amazon, etc.)

Of course, there are those one-off credit cards that may have served a purpose for a limited time and you just keep it on hand to show a high credit limit. For example:

• Credit cards with 12-15 months of 0% interest for a big purchase

• Credit cards with 0% interest on balance transfers for debt consolidation

• Credit cards with high introductory incentives like $500 cash back after you spend $300 within 90 days (just an example)

🔑 Pepper’s Key Takeaways

Never get a card for the sake of having one. The price is just too high. A hard credit inquiry lasts up to two years and if you’re planning to purchase a car or a home, for instance, this is taken into consideration.

Salt and I have 3 personal cards each:

• One shared account for cash back which we use throughout the week and pay off on Fridays

• The second is another shared account for big expenses which we pay off once a month

• The third are cards we each acquired during college to establish credit. We charge a revolving small payment there each month. (subscriptions)

Buckle up for some real talk. Our candid, no-nonsense advice may not win popularity contests, but it sure gets results.

1. Practice Regular Budgeting: Having a detailed budget helps you understand your spending patterns. You can identify areas of unnecessary expenditure and redirect these funds toward debt repayment or savings.

2. Utilize Low-Cost Index Funds: Investing in low-cost index funds is a simple, effective way to grow wealth. They offer market diversification and have historically proven to deliver reliable long-term returns.

3. Consider Refinancing High-Interest Loans: If interest rates have dropped or your credit has improved, refinancing can reduce your loan costs. Lower payments can free up money for investing or faster debt payoff.

4. Optimize for Long-Term Gains: Investing with a long-term perspective can yield significant returns due to compounding. Stay patient and avoid reactionary decisions based on short-term market fluctuations.

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_{Disclaimer - Any content produced by Salt & Pepper Brands is intended for informational use only. When it comes to managing your funds, we love to provide high value to our readers and give actionable tips. However, you shouldn’t construe anything here as legal, tax, investment, financial, or other advice.}