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A Star Wars geek's guide to managing credit

Dawn Papandrea

August 20, 2015

Long ago, in a galaxy far, far away (or so it seems), your credit card was a convenience that made life easier. But then the evil empire of debt and high interest struck. Luckily, by educating yourself, you can become a Jedi master to bring balance to your financial force. Here's how…

Rule 1: Don't be seduced by the dark side. It's hard not to indulge once in a while, but if you're short on cash, spending beyond your means can sap the energy beam of your lightsaber really quick. “Resist the dark side of cash advances, or the promise of bonus points if you can't afford the purchase,” says Andrew K. Johnson, communications manager of GreenPath Debt Solutions. And read the fine print when it comes to using those handy checks your credit issuers send you, or a cash advance. “Oftentimes, interest rates are much higher than your regular APR,” says Johnson.

Jedi credit trick: Always do the math to see how a borrowing decision will affect you down the line, says Johnson. If you are really cash strapped, for example, rather than rely on high interest cash advances, instead consider looking to family members or a credit union to see if you qualify for a short-term, low-interest loan.

Rule 2: Avoid the Droids. Tired of speaking to machines when you have a credit card concern? Sometimes, it's vital to get a live person on the phone. “While it's easy to 'press 1,' if you just want to get your account balance, you certainly want to talk to a human being when it comes to suspected identity theft or credit card fraud,” says Johnson. Another reasons to get a human on the phone is if your account is in good standing, but you were a day or two late on your payment. In most cases, they will waive your late fee.

Jedi credit trick: Whether you're disputing a transaction on your account or inquiring about a possible fraudulent charge, be sure to document the name of the person, as well as the time and date you called in case you need to follow up.

Rule 3: Use the Force. The force of technology, that is. It's easy when you have a busy schedule to accidentally forget to make a credit card payment, but even a small oversight such as missing a billing cycle can result in your credit score taking a hit.

Jedi credit trick: “Many institutions offer safe electronic transfers to pay monthly bills, and apps where you can set reminders as to when bills are due or payments will be transferred,” says Johnson. Your credit issuers also offer customized alerts so you can monitor your account; for instance, you can request a text message anytime a purchase over $100 is made.

Rule 4: “Try not. Do, or do not. There is no try.” Yoda's “all or nothing” speech to Luke when training definitely applies when it comes to a debt payoff plan. Whether it's regular card use or facing down a big balance, your budget should purposefully focus on your debts each month until they reach zero. That means paying off balances in full whenever possible, or at least, paying as much above the minimum payment as you can.

Jedi credit trick: You want to keep ample head room with your credit card balances, says Stan Baldwin, COO of Informative Research, a credit report provider for lenders. That's because your debt utilization, or how much of your available credit is being used, is a big factor in your credit score (second only to your payment history). So if you have a $5,000 credit limit across all of your accounts and you owe $2,500, your debt utilization is 50 percent. “Staying around 10-20 percent is good, but to be a Jedi, you should try to be around 7 percent or less,” says Baldwin. “If you do that, you will improve your score a great deal.”

Rule 5: Don't be like Han Solo. Solo was trying to rescue Princess Leia to collect a big reward so he could pay off a debt to Jabba the Hutt. “Don't find yourself in a credit card situation where you are opening new accounts to pay off old accounts,” says Johnson. “It can be a vicious cycle that is hard to get out of.”

Jedi credit trick: If you can't make your obligations, Baldwin suggests looking into credit counseling. These “Jedi masters” can help if you have a chronic spending problem or are facing a financial crisis, such as a big medical bill or long-term unemployment. “It's inexpensive to go to a credit counselor, and he or she will force those tough discussions to wean you from bad habits and into a solid budget.”

Whether you're a young Padawan just starting out with credit or someone who is dealing with some sort of disturbance in the Force, utilizing the credit resources and tools that are available to you will keep you on a safe credit course.