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Happy new year you little financial freak. 

I hope you had a splendid winter break, and didn’t go too hard on any guilty pleasures. 

Looking forward to another year of fantastic financial fantasies. 

I’ve missed you.

President Trump just proposed capping credit card interest rates at 10% for one year.

Right now, the average card charges 23.79%.

If you're carrying a $1,000 balance on your card and paying $100 every month, you'd pay approximately an extra $130 in interest at current rates. At 10% you’d only pay around $50 in interest. 

Not life-changing, but not nothing either.

Credit card companies immediately said “Waaaaaahhhhh” and that they'd stop approving "risky" people (e.g. students, first-time credit recipients, anyone building credit).

IMAGE: Baby crying, “Credit card companies were really upset. They threw a big tantrum cause they might not get their way.”

But these are the same companies that practically say “I’d do anything to get an A professor” wink wink and you’re the professor and the A is you getting their credit card. 

In other words, they spend millions marketing to college students because you're decades of future spending.

Would they really abandon that? Probably not. They'd just find other ways to make money.

This policy probably won't happen. Banks tend to be very persuasive.

But even if it did happen, and even if banks didn't follow through on their threats, the truth is you shouldn't be paying interest anyway.

Credit card companies make a fortune off people who carry balances. At 24% or 10%, they're profiting from your struggle.

So stick it to the man, and give your bank account a smooch, and pay off your statement in full, every month. 

Credit cards aren't evil. They’re just designed to make money off you in every way you can imagine.

Here's the main list of tricks:

0% APR intro offers: They hook you with 12-18 months of no interest. Then the rate jumps to 24% and people forget to pay it off in time. Suddenly that "free" loan costs you hundreds.

Late fees: Missing a payment by a day can cost $35-$40. And if you do it twice in six months some cards bump your APR to the penalty rate of 29.99% or higher.

Cash advance fees: If you use your credit card to withdraw money from an ATM that's a 3-5% fee plus interest that starts immediately (no grace period).

Foreign transaction fees: Many cards charge 3% on every purchase you make abroad. That $50 meal cost you $51.50. This can be something sneaky that adds up.

IMAGE: Mime, “You’re tipping the mime in Paris and the credit card is tipping itself, for no miming.”

Balance transfer fees: Moving debt to a 0% card can be smart, but they charge 3-5% of the amount transferred. It's still worth it to avoid 24% interest, but it's not free.

Annual fees: Some cards charge $95-$695/year (*cough* American Express, cough Chase). They justify it with "credits.” $200 Texas Roadhouse credit, $15/month Uber Cash, $10 restaurant credit… at participating partners. But if you don't use those exact perks all the time then they’re just worthless.

Rewards in useless categories: Cash back on dining or gas can be super helpful, but sometimes it can be deceptive. For instance Discover Cards offer 5% cash back on rotating categories, sometimes it’s groceries, which may be super helpful, but other times it may be stores that you don’t shop at much.

Over-limit fees: Some cards let you spend past your limit. Aww, they shouldn’t have! Then charge you $35 for the privilege.

Pay off your statement balance, in full, every month, before the due date. Don’t spend over your limit, check if it has foreign transaction fees, and don’t use it to pull cash from an ATM.

That's it. Do that and none of these traps matter. You pay $0 in interest, $0 in fees, and you get whatever rewards the card offers for free.

Credit cards aren't bad. They're just expensive if you're not careful. 

Treat them with respect and take all their perks, or they'll treat your wallet like an ATM (with no fees).

Credit card interest compounds. That means you pay interest on your interest.

Here's what that looks like:

A $1,000 balance at 24% APR:

That's $180 saved just by paying faster.

Use a credit card calculator to see this in action.

You can just google one or you can use this one which I like and plug in real or hypothetical numbers: balance, interest rate, and monthly payment.

Then play around with it. Add $50 to your monthly payment and watch how many months drop off.

Credit card debt is notoriously one of the worst types of debt because of the high interest rate. There is also mafia debt, but I’ve heard they charge interest differently.

IMAGE: Big Mafia guy, “Tony came to charge the interest on that loan we gave you.”

Also, quick reminder that I am not sponsored by any of the tools I note here. I wish I was! These are just the tools I use.

Enable autopay for your full statement balance today.

To set this up, open your credit card’s app. Select your card and scroll around for a feature called autopay. When it asks what you want it to pay off select statement balance.

You can also set up balance alerts so you're not caught off guard and make sure that you aren’t spending more than what you have in your bank account.

This takes two minutes and works forever. ;)

Thank you so much for being a part of this newsletter. I am grateful to write to you weekly and I hope this helps you feel more confident with your finances.

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