Loans By Kathy: Every Household Should Have a Budget - Credit Cards

Every Household Should Have a Budget - Credit Cards


The next item in this series Every Household Should Have a Budget will address credit cards.  In our society credit cards have become an necessary evil.  You will need a credit card to make airline reservations, rent a car, or make purchases online.  You will also need credit to develop a credit score!

Each credit card, car loan, mortgage, student loan will be used to calculate your credit score.  If you don't have any credit, it will most likely be difficult for you to obtain a mortgage or car loan.

The calculation of your credit score is based on the type of credit you have, the length of time you have had credit, your payment history and credit inquiries.  Credit inquiries generally only will have a negative impact if you are continually applying for credit.  

Once you get that credit card, it is important that you DO NOT over extend yourself.  The balance should be at 30-50% of the credit limit.  For example, if your credit limit is $1000 the balance should be no more than $300-$500.  Once you exceed that amount, your credit score will start to go down.

One more thing I would like to mention about your credit cards, monitor the interest rate.  If you have been a long term client and paid on time, you may have some negotiating power with the credit card company.  

Again, the best advice, is to stay on top of these accounts in order to maintain your financial health.

Every Household Should Have a Budget - Getting Started

Every Household Should Have a Budget - Step 2

Every Household Should Have a Budget - Savings

Every Household Should Have a Budget - Checking Account


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Kathy Sheehan Senior Loan Officer






Bay Equity LLC

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The opinions and general information in this blog are soley those of Kathy Sheehan.  Specifics regarding an individual case should be discussed in detail with a loan professional.  For a confidential consultation, please feel free to contact me via phone or email.  All terms and conditions are subject to change.


Comment balloon 29 commentsKathy Sheehan • August 18 2013 08:46AM


Kathy, I think having a credit card(s) is a necessary evil.  It does protect one against a bad vendor or bad purchase, however the key is to manage the credit on it as you state in your post.

Posted by Kathy Stoltman, Ventura County Real Estate Consultant 805-746-1793 (Rockwood Realty) over 5 years ago

Kathy it also goes the other way - not having any credit cards.  We just recently had  a young man decide to close all his good credit in 2009 (why I don't know why) and decide everything was cash.  His credit score is still good but he has no recent credit to qualify for VA loan. 

Posted by Anna Banana Kruchten CRB, CRS 602-380-4886, Arizona's Top Banana! (Phoenix Property Shoppe) over 5 years ago
Hi Kathy, great advice and post! I try to use my debit card instead of credit cards as much as possible but I do know that you do need a credit card. Thanks for sharing!
Posted by Karen Johnson, Realtor, ABR, "Bucks County PA Homes" (Addison Wolfe Real Estate ) over 5 years ago

Great post Kathy. Thanks for the info about the credit score.


Posted by Debra Hight, Debra Hight (Coldwell Banker United, Realtors) over 5 years ago

I use American Express. It pays off every month without interest. I do have a Discover Card becasue some gas stations do not accept AMEX. In this case I pay off montly also becasue the interest rate will choke you. My philosophy is rather than paying 21% to 30% interest, I can wait for cash. Let me add that some short sales with two mortgages can't be done as one that I just interviewed becasue of $12,000 indebt on one card that attached the home that the owners can't pay. 

Posted by Joe Pryor, REALTOR® - Oklahoma Investment Properties (The Virtual Real Estate Team) over 5 years ago

I'm loving this series, Kathy.  I don't think folks get enough financial education anymore.  I hope you include teaching kids about money in this series.

Posted by Chris Ann Cleland, Associate Broker, Bristow, VA (Long and Foster REALTORS®, Gainesville, VA) over 5 years ago

AND always have enough to pay the card off every month.  Paying interest on a credit card is like a hard money loan shark loan!  Unless of course there is an emergency.

Posted by Jay & Michelle Lieberman, Creating Calm in the Buying and Selling Chaos (Keller Williams World Class) over 5 years ago

Kathy, they are a necessary evil.  The secret is how they are used.

Anna, you have to establish credit if you ever want to get a mortgage.

Karen, paying for items that you need is always a great step to managing your funds.


Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) over 5 years ago

Debra, always happy to privde relevant information.

Chris Ann, I am getting there....

Jay and Michelle, paying them off or keeping very low balances is the key.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) over 5 years ago

Kathy--  It is amazing that folks who just pay their bills on time without using credit cards are penalized.  I was always told growing up not to buy if I could not afford it. 

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) over 5 years ago

Joan, I agree with you, but we must follow the guidelines.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) over 5 years ago

Making the time to monitor one's credit limit and maintain a 30%-50% of the balance is a great tip for every household!

Posted by Ralph Gorgoglione, Hawaii and California Real Estate (800) 591-6121 (Maui Life Homes / Metro Life Homes) over 5 years ago

Kathy, this is Dave Ramsey country down here. He doesn't call it a credit score, he calls it a debt score. Although, I use credit cards, I pay them off monthly. Dave Ramsey actually suggests doing away with credit cards and only use debit cards. My kids are 21 and 19. They are in college but they are trying to be credit card free. I hope they are successful. I worked for a credit card issuer decades ago. It's so easy for people to get into debt that takes them years to dig themselves out of.

Posted by Tammie White, Broker, Franklin TN Homes for Sale (Franklin Homes Realty LLC) over 5 years ago

Many banks offer debit/credit cards that are connected to a checking/savings account. Those credit cards work for renting a car or for anything else that requires a credit card. 

Posted by Pamela Seley, Residential Real Estate Agent serving SW RivCo CA (West Coast Realty Division) over 5 years ago

Kathy - It's unfortunate that credit cards are a necessary evil.

Posted by Christine Donovan, Broker/Attorney 714-319-9751 DRE01267479 - Costa M (Donovan Blatt Realty) over 5 years ago

Thanks Ralph!

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) over 5 years ago

Tammie, I do not recommend that ANYONE carry credit card debt.  Consume debt like this can ruin someone's financial life.   I do recommend that they establish a credit history if they want to get a mortgage for a home at some point.  Those clients with no credit history/score or limited credit often find themsevles without a mortgage!

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) over 5 years ago

Pamela, that is true,  I do know that car rental companies will hold excess funds on a debit card as a security deposit.

Christine, it is.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) over 5 years ago

I just had a buyer that couldn't get a loan because he paid for everything in cash. So yes, it is a necessary evil that needs a budget, but requires discipline.

Posted by Joni Bailey, Your Huntsville / Lake Livingston Area REALTOR® (101 Main St. Realty) over 5 years ago

Credit cards work as long as the person is directing and monitoring it all...the moment the card takes on its own identity, you are doomed

Posted by Richie Alan Naggar, agent & author (people first...then business Ran Right Realty ) over 5 years ago

Great advice - credit cards are important to have, but equally important not to abuse.

Posted by Wayne and Jean Marie Zuhl, The Last Names You'll Ever Need in Real Estate (Samsel & Associates) over 5 years ago


The interest alone will kill your credit score on top of exceeding your spending limits. Credit cards work when used in moderation. Raking up debt does nothing for you when you have/want to apply for a loan.

Posted by Phil Stevenson, CRMP, "Mortgage Nerd" in Miami, Florida and Texas (PS Mortgage Lending 305-791-4874 or 888-845-6630) over 5 years ago

Great information. I'm glad I ran across this post and will go back and read the rest.

Posted by Gerard Gilbers, Your Marketing Master (Higher Authority Markeing) over 5 years ago

Very good information on credit cards. I had no idea that using 51% or more of your CC balance would cause the score to go down.

Posted by Than Maynard, Broker - Licensed to List & Sell - 405-990-8862 (Coldwell Banker Heart of Oklahoma) over 5 years ago


Richie, the point exactly!

Wayne and Jean, it requires discipline.

Phil, the interest on a credit cards  doesn't play a part in the scoring model. 

Thanks Gerard!  I am glad you enjoyed it.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) over 5 years ago

Than, the higher your credit usage the lower your credit score.  It is as simple as that.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) over 5 years ago

Excellent advice.I have been talking to both of my sons about the same topic for the last couple of years. It's a shame they don't teach them while they are in school.

Posted by Kelly Taylor (Keller Williams) over 5 years ago
This is wonderful advice. Credit cards can be a curse on your finances unless you use it wisely.
Posted by Rosie Moore (Serving Sugar Land, Richmond, Rosenberg, Missouri City) over 5 years ago

Kelly, it is never to early to start that conversation.

Rosie, yes it can.

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) over 5 years ago