Well, life has been particularly trying for me over the past six months which probably has been my excuse for my absence on this platform. Notice the word “excuse” as I have also just realised the real reason why I have been postponing the write-up on this particular topic.
My advice on how to use credit cards responsibly is a true irony as I do not feel worthy of it. However, this opportunity is also a blessing as I will be sharing with you some of the numbers of things I have learnt from having my very first credit card at 17 to having a few now as a grown woman.
Without getting too technical here, I am sure we all know credit cards are types of loans. This means we may use them for purchases but must ensure we reimburse the lender by making periodic repayments towards the balance as per the agreement between the bank and the spender/user.
The primary purpose of a credit card is to rescue during moments of emergencies or to help with big purchases to benefit from a lower or free interest rate, although we really should save for rainy days and not rely on those plastics.
Here is what my perception of credit cards were at 17 and this should at no cost be emulated:
My ignorance during this youth recklessness was an absolute bliss as I would impulsively purchase fashion items I didn’t need whenever I was feeling sad from certain emotions I could not handle; shopping was indeed my therapy not my bible which was indeed a shame as I should have known better; I am fallible.
At 17, I was still at home with no financial obligations and was working part time and making roughly £450 a month which retrospectively should have covered more than my needs. In addition, I had a credit card with a limit twice my monthly wages. The worst part of it, I was only making minimum payments which meant it took an eternity to finally clear the balance.
A decade after that saga, I can safely say that although I have moments of weaknesses with my credit cards, I am a lot better at acquiring and using them responsibly and here is my approach.
You will find as your credit score improves you get so many offers through your door. I have become somewhat selective in accepting these offers. I suggest you sift through for the best interest rates or types most suitable for your current circumstances. For instance, if you are looking to consolidate old debts look for balance transfer deals and for one off big purchases for 0% on purchases for a certain period etc. When you do finally select any of those offers, it is worthwhile to spend some time doing a little research to ensure you are getting the best deal on the market based on your score.
Once you receive your card, my ultimate tip is to ensure your limit for the first year is no more than what you make per month and be sure not to accept any limit increase offer as this will only engulf you into more debts. This will enable you to have a bit of control over your spending and help you gauge your spending and repayment pattern and its sustainability.
The next tip would be asking oneself whether the balance on the credit card can be cleared monthly upon the receipt of salary/wages or whether you could repay more than the minimum payment. My rule of the thumb is, if I can pay three times the minimum payment at the end of the month and the item to purchase is a need not a want and cannot wait until payday then I proceed.
Now, another smart way of managing credit cards is having separate cards for different purposes if you can afford to. This means having a promotional interest free purchase card, another one for travel and perhaps another one for your balance transfers. This is not to endorse the use of a multitude of cards but to highlight that money can be saved if we intelligently take advantage of these features. Remember lenders want to attract you first then keep you in debt, so stay alert and take all precautions to never miss a payment as this can have major adverse effect on you credit score.
I have touched on this in my previous articles: habits of the wealthy and financial planning; we must live within our means and one reason one we all become lenient on credit cards is instant gratification which often has deeper roots. As such before embarking on this treacherous route ask yourself why? Before buying that dress, think of the reason not to buy it on the credit card or better yet ask yourself what emotions are not being dealt with and shopping is supposed to alleviate?
As you would have worked out, this article is not to deter you from having and using credit cards but to help you exercise caution when using them. From experience albeit precarious I can confirm that most purchases ever made on my cards have been impulsive as a quick fix to feel better about something and I believe staying grounded in the word has given better comfort.
Nowadays when I feel lonely, sad or unable to complete a task I draw near to the word of God by either using my bible app, my promise box or by listening to worship songs which help immensely in addressing those feelings rather than running away from them and towards credit cards.
Ultimately, the raw truth we all don’t want to acknowledge is if our earnings do not cover us as they should we should seek to improve our earning potential or learn to manage our resources better. Lastly, we must at all costs pay our tithes because this often is an insurance against surprise expenses that may lead one to using credit cards. Trust me paying one tithes work wonders.
I would like to keep this succinct and leave you with this beautiful verse Proverbs 22:7 ‘Just as the rich rule the poor, so the borrower is servant to the lender’. Keeping this verse in mind and meditating on it will help us use those plastics responsibly and not let them use us. This will help you avoid emotional purchases and thus credit card debts.