Good morning Dinks. As you may remember I am a reformed spend-a-holic. Actually I should say that I’m a reformed credit card user. I used to whip out my credit card without even thinking about what I was doing. With just a little swipe of a card I was completely ruining my life, but I didn’t know it at that time.
After a breakdown from financial stress and almost filing for bankruptcy I am glad to say that I am now conscious of every single dollar I spend. I still spend carelessly, but it’s usually on food and it’s not very often. I only carry one credit card in my wallet and I keep the other one at home. This is a big step for me because only a few years ago I had more credit cards in my wallet than I did id cards. Thank goodness this changed.
If you want to keep your credit in good standing, stay away from years of making repayments and avoid thousands of dollars in interest charges then you need to use your credit cards wisely or stay away from them all together. What’s the first step? Stop lying to yourself about your credit cards and your financial situation. I have been there, done that. I could rationalize any type of purchase on my credit card and I did. Then I would have a nervous breakdown at the end of the month when I couldn’t afford to pay both my rent and my credit cards. Thank goodness this changed. Please don’t make the same mistakes I did. My life would have been a lot better without my credit card debt.
Three lies people tell themselves about their credit card:
It’s just this one purchase. Credit cards are like Lays Potato Chips, you can’t eat just one. After you break the ice and swipe your card that first time it becomes an addiction, at least it did for me. It’s never just one purchase and spending excessively can quickly become a costly habit if you don’t pay off the balance each month.
I will worry about the payment later. This is a big mistake because if you don’t have the money now, you may not, and probably won’t, have it at the end of the month. High unpaid balances lead to big interest charges. People like to tell you that compound interest is your friend. The truth is it’s your worst nightmare when it comes to your credit card. Be proactive with your finances, not reactive. Make sure you have the money to pay off your balance before you make the purchase.
I can get a cash loan from my credit card. Cash advances are one of the biggest credit card mistakes you can make. Interest costs on cash advances are usually higher than regular purchases and there is no repayment grace period. You start paying interest on cash advances from the moment that money is in your hand. YIKES! Cash advances usually happen because you need money for an emergency. This is where financial planning comes in. Don’t procrastinate with your money, plan ahead whenever you can. If you keep using your credit card before you know it you will have more credit card debt than money you make in a year. That’s a scary place to be.
Photo from Flickr
Kristina Tahnyak
Tahnya is a Certified Financial Planner and former Investment Advisor turned marketing and communications professional She holds a degree from Concordia University, is debt free and currently works in the field of digital marketing.
What your post said about the lessons of credit card use is so true. Sadly, many people are still lured into the trap and learn the lesson the hard way. I hope through posts like this, some readers can be wise enough to know that there is more to credit cards than becoming swipe-happy.
Another great lie that people tell themselves about their credit card is “I’ll buy it now, and pay it all off when the bill comes” You have the money, but you use a credit card to get rewards points. You mean to just use the cash in your account to make the payment, but when the minimum payment is only $20, sometimes a person is tempted to only make the minimum and keep the extra cash for more frivolous spending.