Credit cards are an absurd creation. I mean, really, what is the point? Perhaps the real key to the success of credit cards and credit card companies is two things:
- the marketing language that is used
- the impulsive nature of the masses.
Credit card – What is a credit card?
In fact, people have become so accustomed to the language that credit card companies have often created in the discussion of finances that my own girlfriend Kim calls both her debit card, and her credit card.
Never mind the fact that a credit card and a debit card are not at all the same thing – she calls both of them: credit card. It’s gotten to the point with many different credit card users to where they seem to think that by getting a credit card and getting the credit limit balance that goes with it they’re somehow being given a new bank account with free money. Sorry, think again!
Perhaps one of the biggest sources of debt in the entire United States is credit card debt. If you are one to browse through personal finance websites, you’ll hear a common story everyday. People in debt up to their eyeballs with $50,000, $100,000, even $200,000 in credit card debt. Maybe in reading this, you’re finding yourself in a similar situation, or maybe you’re headed for the same road. Or perhaps, you’re one of the smart ones who is wanting to avoid making future financial mistakes. If you’re the ladder, then good for you!
Credit cards are powerful financial tools
They allow us to purchase items without cash, and they offer the vital security we are all seeking in making online purchases. After all – if there is the option of zero fraud liability with credit cards and someone manages to steal your number, steal your card, and is making purchases – you can call to cancel the card.
If someone gets their hands on your debit card, they can withdrawal all of the cash out of your own bank account, then cut and run! You will never see it again, because that’s your CASH, where as the fraud that happened on your credit card is CREDIT.
Outside of those two benefits, credit cards really do not do a whole lot of good. If you get into debt and can’t manage to pay a card on time, you’re pretty much screwed, and in more ways than one. These days the interest rates are high, and when it comes to reviving your credit, it can be a very difficult thing to do with a ruined credit score.
In a previous article here, which has since become very popular in lots of blog carnivals all over the place, How the Poor Get Rich explains some of my personal philosophy on saving money and building your financial wealth.
When it comes to credit cards, I outlined a basic system: the first time that you cannot pay a credit card bill in full, cut up the card itself and do not get another card until you’ve paid off the debt. If you follow this simple doctrine with discipline, you’ll manage to save yourself a lot of heart ache, bother, and financial hardship.
Here is the way I handle my credit cards. First of all, I only own ONE. *Gasp!* Some people might think that one is not enough – I think it is plenty. I only use a credit card when it is absolutely necessary, and I only write checks whenever I have no other choice.
When I have the option, I pay for cash, and if it’s a lot more cash than I would normally carry in my wallet, then I plan the purchase and only withdrawal the money shortly before making the purchase itself.
And when I say shortly – I mean shortly, as in if you’re going to go buy something like a new computer and you take out a few thousand bucks, you withdrawal that right before driving to the store.
If you feel really uncomfortable paying with cash(I admit sometimes it just would not be practical), then write a check. But remember to filter, funnel, and restrict your flow of funds very carefully through whatever medium they’re going through.
If you use a credit card to make a purchase online and you do your credit card banking online, go straight to the credit card and pay online right after you’ve made the purchase.
Do not wait. Do not say, “I’ll do it later,” and if you’re buying something you do not yet have the money for – you’re making a mistake.
You might think: “But I have a credit card, and credit is credit, shouldn’t I be able to buy it now and pay for it later?” In a word: NO. Do not buy anything you do not already have the cash for, in full, right now.
Living by this principle, I have a rising credit limit with almost a constant balance of: $0.00. Zero dollars is a beautiful number when it’s the amount of debt you have.
Again, I cannot reinforce enough the wonderful philosophy of living by this code: do not use your credit card unless you can pay the credit card right this second, and if you can pay it right this second, then pay it! Are you buying a car? Write a check for your down payment, don’t do it on credit.
Are you buying a house? Again, write a check! Do NOT use a credit card unless it is absolutely necessary or if when you get home you’re going to pay it over the phone or online.
Credit Card without Bank Account
For some people, using a credit card is their only option when they have nothing in their bank account. If you have to choose between using your credit card or starving, obviously use the credit card, but wait – if you are in that sort of situation, something is terribly wrong! Credit cards and credit in its very principle is a sign of honorable wealth and financial competency. If you are down to using your credit card, do whatever it takes, no matter what, to start earning more income to pay off those extra expenses. I know this may sound really simple, but if you cannot afford it, you do NOT buy it. Period.
Stay out of Credit Card Debt
If you’re already in debt, and wanting to get out of debt, I know that I’ve given a lot of information here that really just tells you how to stay out of debt. If you’re already there, though, do not focus on debt. Your focus does not belong there, your focus belongs on what you want – focus on financial abundance and wealth. Do not concentrate on debt, concentrate on getting extra income, cutting your expenses, increasing your cash flow, and set up an automatic amount of money that will continue to pay off your debt month after month. Cut whatever expenses you possibly can to make this happen and pick away at the debt until it’s entirely gone and you’re back at surplus. That is your first step.
Also, some of you out there may have a spouse and you are hiding your debt from your spouse. BAD mistake. Tell them the truth and bring your problem into admittance so that it can be resolved.
Perhaps one of the best pieces of advice I could give is that if there was a way for you to avoid handling credit cards at all – then do it!