Use credit cards wisely and manage student loans
Credit Cards
As Christians, we are called to be good stewards of the resources God has given us. This includes our money. One way to be a good steward of our money is to use credit cards wisely.
Credit cards can be a great way to earn rewards, such as cash back, travel points, or merchandise. However, it is important to use credit cards responsibly. Only use credit cards if you can afford to pay the balance in full each month. If you carry a balance on your credit card, you will be charged interest. Interest rates on credit cards can be very high, and negative compound interest can quickly add up.
One way to use credit cards wisely is to use a 2% cash back credit card. A 2% cash back credit card will give you 2% cash back on all of your purchases. This can add up to a significant amount of money over time.
The Bank of America Preferred Rewards credit card is a great option for a 2% cash back credit card. This card offers 2% cash back on all purchases, and you can earn up to 5.25% cash back if you jump through some hoops. To earn the maximum cash back, you must have a $100,000 balance across BofA accounts. To do this, you can transfer a Roth IRA from another brokerage over or rollover a 401k into a Traditional IRA. See FrugalProfessor’s posts on the Preferred Rewards program for how to do this. If you shop at Costco, the same Preferred Rewards status can push you above 7% back on Costco spend via Shop Cards — see my Ode to Costco.
Student Loans
Student loans are indeed a significant financial concern for many individuals, often termed the “bane of all students’ existence.” Navigating repayment plans and interest rates can be challenging, but understanding the various aspects of student loans can help manage this burden more effectively.
One potential relief comes in the form of the student loan interest deduction, which allows you to deduct up to $2,500 of the interest you paid on a student loan during the tax year. However, there are income limits for eligibility — the deduction phases out above certain income levels; see IRS Topic 456 for the current thresholds.
If you hold student loans, consider refinancing them to secure a lower interest rate. This can help reduce the overall cost of your loans and potentially shorten your repayment term. Be aware that refinancing federal loans with a private lender gives up federal protections like income-driven repayment, so weigh that trade-off before you refinance.