Article By: Luciano Martinez
As artists leave school, attain a job, and begin to pay off their student loans, they are suddenly thrust upon the harsh reality of acquiring debt. For many people, this debt can be very distressing and at times leave a person to feel like the debt will never subside. Even though the goal is not to acquire more debt, one must still learn how to use their future spending to their advantage. I asked Eric J. Friendrichsen M.D., a careful financial planner on a few ways artists could save money by using their credit cards appropriately. Here is what he had to say:
1) Examine Your Life And Use Your Credit Cards Accordingly
Some artists travel frequently while others are more homebodies. No matter what your lifestyle entails, there is a card perfect for you. You just have to find it. Below are a few recommendations on the type of cards out there.
AMEX Blue Cash Preferred: If you are not much of a traveler consider the AMEX Blue Cash Preferred. The card gives you 6% cash back on groceries, 3% on fuel, 3% at select department stores, and 1% on typical purchases. The only catch is that this card has an annual fee of $75. If you purchase much of your food, gas, and clothes on this card and pay it off fully every month, the savings that this card provides surpasses the fee by a long shot.
Chase Sapphire Preferred: There is a huge range of travel cards with enticing bonuses. The Chase Sapphire Preferred is a card I find incredibly appealing for frequent travelers. When signing up to this card, Chase will give you 40,000 points after spending 3K in the first three months. The points can go towards free flights on such airlines as United or hotel stays at Marriott. In addition, Chase includes a built-in discounted travel booking service.
AMEX Starwood Card: Another card that travelers may benefit from is the AMEX Starwood Card. The Starwood card gives you 25,000 points which can be used towards a flight or used at any SPG hotel(Westin, Sheraton, Four Points, or W hotel). Like most cards, this card can be closed prior to one year of use to avoid annual fees. If you would like to keep the card, you may want to think about reopening it through a business partner or a spouse. A new card in a new name allows all the “new card bonus points” to add up all over again.
Something to remember, there is a lot of travel cards out there and most offer a signing bonus. Never feel married to just one card.
2) Find Out What Perks Your Card Provides
There are many perks when signing up for a credit card. While most airline cards will discount or forgoe your luggage fee, some will also offer you an annual companion ticket at a discounted price. Some cards even go further giving you “priority boarding”. There are many more perks that can be listed but this varies by card. Make sure you ask a credit card representative about these perks.
3) Closing Your Account Prior To The Annual Fee
Avoid high annual fees. Most cards charge after the first year of use. As soon as you get a card, write an expected annual anniversary on your calendar. Close the card or change the card to another offered at the same bank prior to being charged these fees that can be as high as $175. Most cards will refund the annual fee if you pay off and close the account the same month the annual fee is charged.
4) Buy Your Art Supplies On Your Card But Keep A Zero Balance
Credit card interest rates are through the roof. The most important recommendation I have for you is to pay off the balance on your highest interest credit cards. If you are in college or attending an art school, a student loan to pay off a balance is not unreasonable. Another way to bring down your credit card debt is to consider a transfer of your balance to a new card with a 0% introductory interest for 12-18 months (Citi Simplicity One, Chase Slate, Union Bank Platinum). I highly recommend never using this card until it is fully paid off. If you are having difficulties paying down your balance, consider the Chase Blueprint Plan. The card will help you create a payoff schedule.
5) How To Maintain A High Credit Score
Keeping a zero balance on a credit card with a large credit limit increases your credit score. When switching credit cards, it is easier and less aversive to your credit score to switch from one card to another at the same institution, as typically another credit inquiry is not done.
Too many money experts advise never to pay with credit cards. Personally, I feel credit cards can work in your favor if used correctly. I pay for all expenses that allow credit card payment without added service fees. This allows me to pay for travel, cellular service, home utilities and services, groceries, gasoline, dining out, and insurance. Paying where able with credit cards is what the smart consumer with financial discipline should do. These benefits are the privilege of methodical and knowledgeable credit card use. I must stress that if you do not have the discipline to pay your cards on a monthly basis in full, you should stay away from this strategy.
As student debt rises in America and abroad, one must always be smart with their finances. It is not a small feat to learn how to manage your money and your business especially when you are a self-sustaining artist. Don’t allow the amount of loans you owe dictate how you use your credit cards if used responsibility. When you have learned to master your credit card usage, you will start to see them less as debt and more as luxury.