Several years ago, a girl from a community where I used to belong called me up one day asking if she could ask for a loan. When she mentioned the amount, I gasped and told her I didn’t have that amount on hand. She was upset as she recounted her story.
A sales agent had offered her an application for a credit card. She had accepted it eagerly and upon the bank’s approval, had begun using the credit card regularly.
“What happened?” I asked curiously. “I was informed just this week that I owe the bank this much. I don’t even know how it happened.” Her words came out in a rush. “It seems there is interest of sorts made on my purchases. The bank is very scheming! Had I known it, I wouldn’t have filled out that application form. Now I am in this mess!”
“What do you mean by interests on your purchases?” I was confused. “The only time the bank charges interest is when your payments are delayed. Did you pay your credit card bill on time?”
“Of course, I paid it on time!” she answered vehemently. “Did you pay the full amount stated in your bill?” I persisted. “No! I paid only the minimum amount due.”
Then I understood. All along she had thought it was okay to pay only the minimum amount due so the remaining balance was charged with interest. And the amount she owed the bank had grown steadily as the months passed. I then tried to explain that the idea of having a credit card lies simply in the fact that you don’t have to carry large bundles of money around while you shop, eat in a restaurant, buy an airline ticket and so on. You don’t have to shell out money right away. Also, it is more convenient to carry a credit card instead of cash to dispel the danger of being robbed.
But the most important thing to remember is to promptly pay the full amount when your credit card bills arrive. Otherwise you will be charged an interest and that makes the product or service more expensive.
“I didn’t know all these things. It should be the responsibility of the bank to explain this!” She was still furious. Well, there wasn’t much I could do at that point so I ended up lending her a small amount of money before we said our good-byes.
I got my first credit card when I was only nineteen years old. My Aunt Catherine had given me an application for Diners Club International; and as she handed me the gray card, she said, “I chose you to have one because I know you can spend responsibly.” My heart swelled with those words.
I have been using credit cards for eighteen years now and I maintain around four of them (Citibank, HSBC, Equitable PCIB, Metrobank). The banks nowadays have a lot of promotions to encourage people to get one of their own. After that phone call, I came to realize certain things and was grateful for what I have learned.
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If you hate numbers, be willing to learn. Be financially intelligent. Learn. Ask. Research. Make it a point to understand the policies of the bank and the credit card itself. If you need to loan, find the lowest interest possible.
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Live within your means. Through the years, I have learned to be disciplined. I spend only on what’s necessary. I do splurge every so often but I make sure I have the money to pay for it. Otherwise, I save and wait to buy the stuff that I want. This is very important, so I will say it again. Buy something with your credit card only if you have the money to pay for it.
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Keep track of your purchases. Double check your credit card bills and make sure they are in order. A friend of mine recently discovered an amount that was billed twice.
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Pay the full amount of your credit card on time to prevent finance charges. Once after arriving from an out-of-town trip, I was dismayed to see that one of my bills was unpaid and overdue. I immediately called the bank and asked if they would consider waiving the finance charge. And since I have always paid my dues on time, they willingly did.
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If you are already in a credit card debt situation, look for a professional company to help you set goals and targets and pay off your debt. Does it work? Yes! I know of several people who have made their way out of it.
Credit cards are a tool for your convenience. Take control of the card, after all, you own it. It has no power over you unless you allow it. Put your credit card in its rightful place by spending smart and paying responsibly. The credit card then becomes an instrument of convenience and not a harbinger of debt.
Let the abundance and prosperity of wellness and well being remain in your life. Put those credit cards in place and bask in the fullness of love and life.
By: Michelle Simtoco
I am one of those consumers who did not know how to use credit wisely- was caught up in the NYC life, with spending, going out, but learned my lesson, and I am out of debt now, except for a minor bills which I can handle. My s/o absolutely dislikes credit cards, but owns two and pays the full balance every month. It ironic but nowadays, its a requierement to have a credit card if we want a good credit score.
Good article!
Hello Marie! I guess it pays to be financially aware. And sometimes it gets to be tempting thinking that it is okay to just pay the minimum balance. And we forget that the interest incurred is huge! I thank you for sharing your experience. Love and light..
Initially, I applied for a credit card for the sole purpose of having a credit record. In the USA, where borrowing is based primarily on credit rating, having no credit record will not get you any loan. Of course, you have to preserve a good credit rating for them to afford you, not only a loan, but at a low, favorable interest rate. In short, your friend should not be too upset when she didn’t pay her charges in full and have to pay interests; that is, if she had kept paying on time. Unknowingly, she made herself glow in the eyes of lending institutions. Your advise on “living within means” is most important because, often, when we don’t see hard cash flowing out, it is hard to keep track of our expenses! Keeping one or two cards is good for emergency reasons. If you have lots of credit cards, from the same bank, consolidate these cards to one or two. This way, the maximum credit limit will be extended to the total of the credit limits from each of the credit cards. DO NOT simply terminate the credit card accounts because credit bureaus take this as a negative and, thus, would decrease your credit rating.
Best wishes to you Michelle – Rick.
Hi Rick, thank you for sharing such a valuable input. I do keep a couple of cards for emergency reasons and because it is convenient. I also noticed that having a good credit rating makes the bank give you more credit cards. LOL But I refused many of them. It’s hard to keep track of all the bills. My friend was upset because she felt she was duped. She never quite understood that if you didn’t pay everything in full, interest will be charged. It does pay to know these things.
It’s wonderful to hear from you.
If you have a moment Id like you to take a look at the new credit laws put into place in 2010 that will be affecting this article. Might consider revision.
New credit laws? You mean the banks are willing to change their laws regarding charges if you don’t pay your bills on time? I doubt it. Maybe in other areas of credit like loans. But in credit cards, it remains the same. If you don’t pay it on time and in full, charges will be made.
I like this hub, some good advice and useful comments. Just goes to show that credit is only a bad thing if you don’t know how to manage it properly
That’s exactly it Sam. You are so right!