The Consumerist recently posted an
excerpt from a financial expert's book advising consumers to always carry an additional "clean" credit card.
What's that? A clean credit card is a card you manage to pay off in full every month within the 30-day grace period, accumulating little to no interest fees and penalties.
Most Americans carry around a certain amount of credit card debt, but simply adding on to that number with every purchase will only raise interest and penalties, all the while pushing back the day you'll finally have it paid off.
But if you have one clean credit card that you charge with purchases you know you can pay off every month, that money will not contribute to your debt.
The article provided a simple example based on a credit card with a 32 percent interest rate, which costs consumers about $1 a day for every $1000 they owe.
Without a clean card, suppose you make a purchase of $1000 when you already owe $100 on your regular card. At the end of the month, you owe $33 in interest.
Alternatively, if you spend $1000 on your clean credit card and pay that off in full, you owe zero interest on that card and only $3 on your regular card (which we're still assuming has $100 on it). That's $30 in savings.
The only major con is that splitting up your credit purchases like this could make a dent in the rewards you're racking up—but the author claims you'll more than make it back with the money you save from decreased interest.
Have you ever heard of "clean" credit cards? How do you handle your credit purchases and debt?Image Source
Comments (24)
I don't have a credit card so mine is ...eternally cleanish.
I've had a credit card and a overdraft for years, and never touched either.
(Your math doesnt add up. It should say $1 for every $100 in debt, not $1000.)
We have two credit cards and always kept them "clean" up until the end of last year. We went about six months only paying about half of what we charged on them. Now we're back to paying the balance every month but still have a little bit of residual debt that we're trying to make a dent it. Hopefully it won't happen again, but my husband had to take a huge cut in pay for about 8 months and we didn't do very well at reducing our living expenses. Now his job is stable and pays much better.
Credit card debt is easy, and many people use it to spread out certain expense over a longer period (like Christmas gift spending
). But it's really expensive because of the high interest, so it's always good advice to pay of any outstanding debt as soon as you can.
If you regularly need extra cash for larger expenses, it is usually a lot cheaper to use credit from a bank, like an overdraft.
Paying in full doesn't make you lose your rewards unless the card carrying the balance has rewards and the clean card doesn't. Which makes no sense to work that way because rewards cards tend to have higher rates.
I gotta wonder... unless you've made some huge mistakes with your cards, how do you get a thirtysomething percent rate?
I have one credit card that I carry and I always keep it clean. I've never had to keep a balance on it.
All our credit cards are 'clean'. We never carry a balance month to month.
@der_lila_Stern@xanga - The math confused me a little too, but the original article said $1 for every $1000.
One credit card, and almost always clean.
i thought this was in reference to not making the "naughty" purchases mentioned in the previous post. lol.
Three credit cards. i'm 21, and they're all completely pure. :D
I have one credit card, I keep it clean. But then again I'm only a college student and I don't have a massive amount of bills that are more than I earn in a month.
It is a great strategy to use a CC, but pay it off every month. This is the best way to build credit, and points if yo uget a card with benefits. I get L.L. Bean points all of the time. So instead of paying teh interest, I get interest!! yay me!
I'm a credit card deadbeat--I pay off every single statement in full, so I don't worry about paying interest.
I only use my credit cards if I can pay them off each month. The only exception is for emergency purchases that cost a lot, like car repairs. I refuse to live in debt to the rich. I'd rather eat them.
PS. The math is correct on the $1/DAY for $1000 balance a month for a 32% APR CC. It's a little less than a dollar based on a 31 day month, but approximate.
I think it's a great idea also, to have a clean card. The idea of not having any credit will not bode well when someone tries to go for a loan for a house or car; there's no history to work from. It's just a matter of managing your revolving credit and making sure everything remains kosher with your credit score.
I can't believe anyone uses anything but "clean" credit cards. I would never, ever consider buying anything on my credit card that I couldn't pay back at the end of the month. For me, the point of having it is to build credit, not so I can have things that I really can't afford.
I have never heard of the term but everyone should have clean credit cards! Living off credit is never a good thing. Sadly this is pretty common practice, hence the current state of the economy.
Mine has always been clean, that's how I was taught to use it and I don't plan on using it differently anytime soon.
I have one credit card. By this definition, it is clean. I've only missed the grace period once.
I plan to only use the pre-paid kind. Don't plan on spending what I don't have.
I've never heard of it but I do have a clean credit card. I cut up the card a long time ago but I have 1 monthly charge for a subscription on it per month and it gets paid off every month. I didn't know it was positively affecting me. This is awesome news!!!
I don't use credit cards, just checks, cash and debit cards. That way, I know that I'm working with my own money and not borrowing what I don't have. And I know that as long as I keep careful track of things, I won't overdraw. :p
I hadn't heard of "clean" credit cards before, though. But, the theory makes sense. Maybe it works, that would be helpful to people. :) But, I think it leaves too much room for people to be tempted to use the cards the wrong way and the "clean" card probably wouldn't stay "clean" for very long. :/