What are credit cards? Credit cards are those pretty shiny plastic cards offered by banks that ‘lend’ you money to buy what you want then pay them back later either in installments or in full. What ever is easy for you! After all, they are thinking about your convenience.
Isn’t that nice?
I don’t think so.
Too many people, especially young people who know nothing about finances and what it means when they commit themselves to one form of financial responsibility or another, think that a credit card (or credit cards) represent a sort of financial freedom that they previously did not have.
Wrong. Wrong. Wrong.
When a person opts to own and use a credit card, they are choosing to use money they don’t have to purchase something they want (yes – WANT; I would make a bet saying more than half the people who own a credit card for more than a couple of years can not even list half a dozen things they NEEDED to buy with their card.).
This is exactly the opposite of the very reasonable and well thought out saying of "Live within your means".
Many people who have credit cards forget this. Thus, rather than mastering their finances and debts – they allow it to master them.
Remember people: Slavery is a bad thing. Especially when your the slave.
Credit cards, however, do not always spell doom and gloom. No indeed. If you are using your credit card solely to pay for your NEEDS (ie. fuel, groceries, bills, insurance) and want to avoid carrying hundreds of dollars in cash then kudos to you. You are mastering your finances.
Credit cards also come in handy for emergencies but quite frankly, if you saved properly from the beginnning and had insurance to cover yourself, loved ones and properties then you should not have to resort to using your credit card to pay for large unexpected expenses.
Think about expenses you will incur before deciding you are responsible enough to own a credit card. There are monthly fees you must pay (at least in Malaysia there is) along with whatever payments you need to pay.
The most important thing to note is: NEVER SPEND MORE THAN YOU CAN PAY IN FULL BY THE END OF THE MONTH!
No. Don’t say minimum installments are there for a reason. The reason is not for YOUR benefit. It’s for the banks. Every time you decide to let another month roll by with a balance to pay your allowing them to add the insanely high interest rate to it.
Do you know what that means?
It means that you are the chump who is paying more for whatever you purchased than the smart fella who paid in cash or settled his credit card balance.
Take a moment and let the realisation sink in.
So please, people, think a dozen times over on whether you want or need a credit card. Think about whether or not you are responsible enough to handle owning a credit card. If you decide you are, then go to each and every bank within convenient range (you don’t want to let commuting be a problem when paying back your credit cards do you?) and search for a credit card suited to your spending habits and needs.
Like to travel – look for a card offering offers pertaining to travel and holidays. Love rebates – look for cards offering good rebate options. Enjoy eating out – look for cards affiliated with restaurants you frequent and give discounts for eating there.
And finally don’t forget to create a routine and stick to it.
Pay your card on time every month. STICK TO A BUDGET. Just because you got plastic does not give you license to spend 100% of your earnings. That is just stupid. Continue putting aside money for investments and savings. Leave your credit card at home when you are going out for movies or window shopping, etc so you don’t make a horribly regretful impulse purchase.
In the end, don’t allow yourself to walk in blind when getting a credit card because it is another responsibility you must be willing to shoulder and not allow to get out of control. Hope this helped open your eyes a little.