background photo from here.
Credit cards are awesome. Let’s face it, having one is a really big help to one’s lifestyle. But, it can also ruin your financial health. I’ve seen people use it to buy what they need, what they like, what they want but don’t really need and then end up cutting the card up simply because they can no longer afford to pay for it. Usually I see this among some of my former office mates who are just starting work or just getting their first credit cards and usually, instead of using their credit cards wisely, they end up losing more of their money to credit card bills than having it stored somewhere for investment of safe keeping. To be completely honest, I probably had committed some of those first-time-credit-card-holder mistakes and I thank God my mother had the sense to give me a supplementary card instead of allowing me to get my very own credit card first, otherwise I would have killed my savings to the point of no return!
So I’ve decided to list down a few things I’ve learned not to do with my credit card to avoid unnecessary bills and ruining my budding financial health (yes, because I treat my bank accounts like my body, I take care of them as if money is their life source as food and water is to mine).
1. Do not, under any circumstance, apply for one unless you really need it and if you fully believe you are capable of facing the consequences of having one. For me, I believe this is the most important thing to consider when you apply for a credit card. Make sure you are getting one because you absolutely need it, like say, you need to buy a new piece of furniture or appliance for your house because your old one broke and since some credit card companies offer a 0% instalment, it can totally lighten up the burden of having to take out a huge chunk of your savings that could have also been allocated to other necessities; or you need to use credit cards for groceries because you never can tell how much food you’d need and you don’t really want to bring a huge wad of cash while strolling around the grocery store; or you need to use a credit card for emergencies, you suddenly get an allergic reaction and you need to buy meds straight away but you’re out of cash, credit cards can come in handy at times like this, and you probably would need to get one. Just remember that with credit cards you have to be mindful of how much your charging into it otherwise you’d be in for the shock of your life once you receive the bill.
If you’re planning to get a credit card so that you can get that hot new pair of Louboutin’s or to use it for that Forever 21 mega sale, then stop right thinking about getting one now. You won’t be able to handle it.
2. Do not use it to buy what you want, use it only what you need to have. So now you have a credit card, yay! A lot of people usually get a sense of freedom when they get their hands on their first plastic card and often will feel a certain rush when you use it to pay for things and not spend money on it immediately but remember, just because you’re not shelling out cash up front, doesn’t mean you aren’t spending it. Credit card companies only allow you to use credit cards so that you can “buy” something you need while you pay for them later. So before purchasing that gorgeous YSL pumps (or whatever it is you want but don’t need) with your credit card that has X amount of limit on it, ask yourself, can you actually afford that or are you only going to be able to buy it because of your credit card? If you answered yes to the latter, then obviously, step away from the shoes, girl! Just because you’re credit card has a huge limit to it doesn’t mean your bank account does! If you don’t have the same or larger amount saved than your credit card’s limit, don’t even think about using your card. The basic rule I follow with using my credit card is that if I don’t need it, I won’t swipe it. Actually, I think that same rule applies to my money too. Remember, self-control is the best way to protect your savings, always think long and hard before using your card to buy something.
3. Do not spend beyond your paying capacity. I think I briefly touched this topic in the second one but I’ll elaborate more on it here. As I’ve said above, if your bank account doesn’t have the same value or higher than your credit card’s limit, then don’t spend anything beyond your limit (by your I mean your savings) simply because if you can’t afford to pay for your credit card’s full limit then chances are you’re going to drown in debt just because you kept using it without thinking twice, maybe even thrice about what you’re even using it for.My rule of thumb is if I reached at least 10% (maximum would be 20%) of my credit card’s limit then I’m going to stop using it until I’ve paid that off, use cash instead of my card or if it really can’t be avoided, I’ll lessen my use of it as much as possible. This is because even though I have a credit card, I can only use it up to a certain amount I feel safe and comfortable with, an amount I know I can afford to pay back once my bill is due. This allows me to watch my expenses and make sure that I don’t get fined by the credit card company because I failed to pay on time.
4. Do not miss paying your bills on time to avoid unnecessary fees. This is probably a major saving tip. Credit card companies will always charge you if you pay your bills late. This charge varies per company but it can range from 2% above so think about it, if your bill is somewhere along php 10,000 ($200) every month and your credit card company charges you 2% for paying late (php 200 or $4) then you just lost money you could have allocated elsewhere! I mean sure some of you might think that 200 pesos or 4 dollars isn’t much but keep missing paying that bill on time and let’s see how much accumulated 200 pesos you’ve lost by then!
I’m sure you’ve noticed that these are pretty simple and basic but so far basic is working for me and I hope it works for you too! Use your credit cards wisely and avoid becoming a Rebecca Bloomwood before the green scarf!
Always remember, needs over wants to avoid unnecessary fees and a sad bank account! 🙂