This title is very deliberate, following on from the article in Part Two on “How to destroy your debt”, I received a request asking for a more in depth article regarding Credit Cards or Care with Credit Cards to be more precise, could see the value of doing such an article so here we are.
Suppose another title could have been how not use credit cards or max out and worry. A number of alternatives spring to mind, however know that you will understand what I mean.
If we are honest credit cards can be very good and useful, or very bad and seriously dangerous to your wealth, also your health.
Basic Concept of Credit Cards
My understanding of credit cards falls into four areas namely:
- To enable you to buy something that you would like when out shopping but do not have enough cash or your cheque book with you.
- You are a little short of cash until payday but the wife/partner must have that new outfit now, so out comes the credit card, one satisfied other half!.
- A form of private hire-purchase, or buy now pay later scheme, to enable you to spread the cost of the purchase, stopping you incurring an overdraft at the Bank. You will just have to pay interest to the credit company instead!
- If you are buying an expensive item, then it is a form of insurance if something should go wrong with the purchase.
The Cost of Credit Cards
This to me is the crux of the matter, over time they can work out to be a very expensive form of credit if you add up all the interest charges.
It is the main reason that I have always cleared my debt each month.
A good idea is to try to pay a little more than the minimum payment, just a few pounds or dollars will make a difference, it will also reduce the debt quicker.
Always bear this in mind, the interest can seriously damage your wealth, and as mentioned before, also your health!!
Are They Really Useful?
They certainly have their uses, providing that you use them carefully. When we were scammed over twenty months ago, the
only way that we could survive was to use the two credit cards which we have. Before the scam I always paid any outstanding amounts in full every month, to avoid the interest charges. You will appreciate that this changed rapidly, at one stage I was repaying just the minimum charge, the totals grew until the limit was almost reached.
Thankfully now that the Bank has restored our funds, we are debt free once more, as the first thing that I did when the money arrived in the bank account, was to completely pay off both cards.
This of course has enabled us to use the funds, which had to be set on one side to pay the interest, they can now be used for little luxuries, or added to our savings, which can now be restarted.
The Pitfalls of Credit Cards
To an extant have already covered some of the pitfalls in the previous paragraphs but to summarize them.
- Be careful of when and how you use them
- If you are having a problem to repay what you owe each month, remove the card from your wallet, then hide it in a drawer, do not use them at all, this way, as long as you pay the minimum each month, the debt will go down not up.
- Retail credit cards, usually have a very high rate of interest, cancel them, this will avoid buying something in that nice shop that you go in, with the pushy sales staff, who know that you have a card for their store.
Think that it would be wrong of me not to include a few safety checks when you use your card, assuming that you have not put it in a drawer. Also that you really do feel the need to carry one.
Do appreciate that you know that you will need to be aware of scammers and cheats:
Carry your card in one of the special wallets that you can get, this shields your card from those who have the machines that can read your card as you walk past.
At the cash machine not only cover the numbers as you input your number, but be careful of angles, it will not be the first time that I have stood at the side of a machine and have been able to watch the numbers inputted. Must be honest when I see the first one go in, do turn my head away. Usually also advise the person that I could have seen his number had I wanted to.
When making transactions also be aware of angles, some people do have a tendency to stand very close to you at the counter, almost over your shoulder. Make a note of your transactions when you get home, you can use the receipt, also note the transactions which are scanned, these can easily be forgotten, I know that I often do. A small notebook kept for the purpose, will enable you to check your transactions when you receive your statement. This also keeps a track on the amount that you have borrowed.
The only credit card that you should have is the one that you took out of your wallet and put in a drawer.
The best advice if you really struggle, is:
CUT UP YOUR CARD, SO THAT YOU NEVER USE IT, JUST CLEAR THE DEBT
Did think about including these last few sentences earlier on, or on their own, but thought in the conclusion was possibly the best place to really say, be so very careful what you do with your credit card(s) they are almost like lethal weapons in the wrong hands, as they destroy your life and those that you care about.
If you let them, you will get into so much debt with paying off vast sums to the credit card companies, it can not only lead to a totally miserable existence, but you could end up losing your home even your family.
THE MISERY BIT I CAN RELATE TOO, HAVING BEEN THERE MANY YEARS AGO
You find yourself and your family living on cheap food, scrapping for every penny, doing without what you are used to having, is how we coped when were scammed, as we had been there before.
Do so hope that you did enjoy this article on credit cards, if you do have any comments please leave them below, we do enjoy reading your comments and feedback also the time that you take in making them.
The next article will be another standalone article “Managing your time effectively”.
Be Happy, Healthy and Wealthy.
Stuart (aka Edwin)