Should optimists avoid credit cards?

By Peter Andrew

I like optimists. Who doesn't? Optimism is one of America's defining national characteristics, and was an essential part of this country's rise to greatness. But some academic studies suggest that people with too rosy an outlook can get themselves into trouble, especially financially, and can-do can quickly turn into couldn't-do.

The trouble with optimism

Of course, it's not just Americans who can find their optimism tipping over into overconfidence or even self-delusion. Last year, Australian researchers uncovered similar traits in their compatriots. Unusually optimistic subjects in their trials tended to work fewer hours, have shorter planning horizons and fail to clear their credit card balances in full each month.

But there's plenty of that here too. A 2005 Duke University study, Optimism and Economic Choice, found a similar correlation in the U.S. And another, published in the Journal of Economic Psychology in 2007, indicated that the overoptimistic often make poor choices when choosing a new credit card.

For example, those who usually roll forward significant balances might seek out the best credit card reward programs when their rational, optimal choice would have been finding the lowest APRs. Presumably, they kidded themselves that their lives would change: Their income would grow, they'd win the lottery, or they'd magically alter their patterns of behavior and start zeroing their balances each month.

By Justin Boyle

A friend of mine recently sat me down and told me that she was in a dismal, one-sided relationship with her credit provider. She had been a responsible customer, never missing a payment and never maxing out her limit, but the terms of her contract hadn't changed since college and she didn't feel like she could talk to them about it.

Luckily for her (and for all of us), not only is it possible to reason with credit companies, but there are proven pathways to the raised limit or lowered rate that you know you've earned. By arming yourself with a few key pieces of information, you can gently but firmly encourage your issuer to hear what you have to say.

1. Know who to talk to

First of all, most companies put customers through an automated phone tree for routine services. You're not going to get anywhere presenting your reasoned negotiations to the robot that answers your call, so get out of the tree as soon as you can (this is often achieved by mashing the 0 key until you're asked to hold for an operator).

Even when you get a human voice on the phone, you're still not all the way to your destination.

By Tim Sullivan

Credit cards have made it easier to spend money today than any time in the past. Before credit cards, you had to go to the bank and fill out a withdrawal slip whenever you needed easily spent funds. But now we have our money available to us 24 hours a day, which can be both a blessing and a curse.

Imagine making a few bad financial decisions while out on a Saturday night. Back in the day, if you spent all your money on Saturday, you wouldn't have it on Sunday. The banks were closed on Sunday, so unless you could find a place that would accept a check, football would be accompanied by whatever was in the fridge instead of a pizza delivery.

These days, with the easily available funds offered by credit cards, you can continue your spending unabated throughout the weekend. Because of this, many personal finance experts (and others) feel that credit cards are a saver's worst enemy.

But it doesn't have to be that way. Ease of spending doesn't have to come with lack of consciousness. Credit cards can make you a smarter spender as well. By keeping a close eye on your credit card records, you can use your card to improve your spending habits and realize more of your financial goals.

A helpful record

Unless you are saving every receipt and keeping a watchful eye on your budget, having cash in your wallet can lead to untracked spending.

By Justin Boyle

The spring equinox is approaching, and thousands of people are getting ready to rid themselves of clutter that has piled up over the previous year. While everyone's getting their houses in order, take the time to open the dusty door on the storehouse of your personal finance and credit habits. It might be time for spring cleaning in there too.

The beginning of spring is a great time to check your life for pockets of stagnant energy, like the corners of the garage or the back of your closet, and clean them out so that new and good things can take over. Spring is the season of new growth, after all, and new growth tends to thrive when old and needless things are removed from its surroundings.

Some of us approach our credit cards and personal finance habits in the same way we approach the clutter under the bed: If we don't look at the mess, it isn't there. Take a cue from the closet-cleaners and garage-salers this season and see if you can't vacuum some stagnant energy out of your wallet. Here are four tips for getting started:

1. Consider consolidation

I know from personal experience that it can be hard to keep track of multiple credit bills each month. If you can find a zero- or low-interest balance transfer credit card offer with a high enough limit to shoulder the lion's share of what you owe on credit, it might be prudent to shift your smaller balances over.

As far as what to do with the cards whose balances you empty, take a look at tip number two.

By Peter Andrew

Editor's Note: Thank you for your interest, this offer expired and is no longer available.

My niece Jemma called recently, and launched into a long sob story about juggling small kids (it should be an Olympic sport) with trips to the laundromat. Her washer had recently broken down, and couldn't be repaired economically. She was too financially responsible -- something she didn't get from my side of the family -- to dip into her emergency fund, and was saving up for a new one.

The first questions I asked Jemma were whether she'd bought the old machine using a credit card, and, if so, how long ago she made the purchase. I was wondering whether her card offered an extended warranty, which might have doubled the coverage of a manufacturer's one. But the defunct washer was ancient so that was a non-starter. My second inquiry was whether she'd thought of applying for a zero-interest balance-transfer credit card offer. Most of these offer interest-free introductory periods for purchases as well as transfers, so she could easily pay down her new appliance over a year at precisely the same cost (nothing) as saving up -- but without those pesky laundromat trips. One of the cards I could safely have recommended was the Citi® Dividend Platinum Select® Visa® Card.

By Peter Andrew

Editor's Note: Thank you for your interest, this offer expired and is no longer available.

It could have been a lot worse. But at the time, last Sunday, it felt pretty bad. First, the delayed-take-off announcement. Then, the news that the airport to which we were flying was snowed in, and the flight had to be diverted. Next, on arrival, the three-hour bus trip (in a vehicle that had clearly been designed with the leg-room needs of seven-year-olds in mind) to the original destination. And, finally, the seemingly inevitable flu that comes from flying a budget airline that, in order to save a few bucks on fuel, endlessly recirculates the virus-laden cabin air.

If I still flew frequently, I'd cheerfully pay a few hundred dollars a year for one of those high-end airline credit cards that allow you to jump lines with priority check in, security screening and boarding, and give you free access to tranquil, comfortable lounges. But I don't, and those three-digit annual fees are impossible to justify for a few hours of discomfort each year. So perhaps I should consider something more affordable but with fewer privileges: something like the CitiBusiness®/ AAdvantage® World MasterCard®, which is currently offering 30,000 American Airlines AAdvantage bonus miles as a sign-up reward, providing you spend on it at least $1,000 in purchases in the first three months after your account is opened.