Credit Is My Frenemy

They say that you should keep your friends close and your enemies closer. This is how I feel about credit. I hate using it, but if I have an emergency I am glad that it’s available for me.

Credit Cards can be our friend if we treat them right but they can be our worst enemy if we mistreat them.  Some people use credit for all of their purchases all month long to accumulate the points, and then they pay them off in full at the end of the month.  This is a great plan. You are making credit work for you and to your advantage.  You have the benefit of collecting points but not the burden of paying 19% interest on your total purchases.  If you spend less on your credit card than you earn in a monthly salary credit can be your friend because you pay off the balance in full at the end of each month.

However, if you use credit as a personal loan to buy things that you really can’t afford, then credit and its negative energy will consume you and hang over your head like a dark rain cloud.  You know my motto…If you don’t have it, then you can’t spend it!

If you do carry a balance on your credit card don’t only make minimum payments to keep your credit score positive.  Make a 12 month plan (or less if you can afford it) to pay it off.  Don’t feel bad about using your credit card for emergencies. But once the situation is under control make a plan to get the balance paid off.  Factor in fixed payments to your monthly budget so the total balance is paid off within 12 months.

During my credit days I was attracted to credit just like I am attracted to shiny things flashing in my face. Yes, I wear a lot of jewellery! I had 4 different credit cards. The 1^st one because it gave me cash back on all of my purchases, the 2^nd because it gave me points to the pharmacy where I love to shop, the 3^rd because they gave me 1 travel point for every dollar I spent, and finally the 4^th because for a $120 fee per year they gave me a onetime free flight to any state or province that touches my home province. WOW! I was a bank’s dream customer.  However, I learned the hard way. Today I have only one credit card with no annual fee.  I still earn travel and rewards points but now I get 1 point for every $2 spent and that is just fine with me.

Banks offer online tools that allow you to choose the credit card that is best for you. Check out these links to help better understand the credit cards offered in the market.

– https://www.bankofamerica.com/credit-cards/cardfinder.action?context_id=card_finder
– https://www.chase.com/credit-cards.htm

Credit Cards are not the only type of credit available.  Of course there are personal loans which I don’t recommend because you begin paying interest on the entire amount approved right away and it’s not flexible. With a loan you receive the lump sum of money on the day of approval and then you pay it off over a fixed number of years.  Interest rates on personal loans are also high compared to other credit options such as lines of credit.

A line of credit is similar to a credit card in that you have a granted amount of credit such as $10,000. This is an available amount and you use only what you need. You pay interest only on what you use, and as you pay off the balance it becomes available to you again. This is more commonly referred to as revolving credit. The interest rates on lines of credit are generally a lot lower than credit cards but they are not as convenient. You can only access your line of credit in certain ways such as with a check, or in your bank branch.  Whereas you can swipe your VISA or American Express almost anywhere.

Regardless of which credit option is best for you please remember to use your credit wisely. Over the past year I have processed more credit consolidation loans for my clients then I have mortgage applications. Credit cards, loans, and lines of credit are not there for us to buy things that we would otherwise not be able to afford. They are simply a means to an end. Remember to spend within your income limits…not your credit limit.

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(Photo by Andres Rueda)