The credit card has now become one of the most used things when it comes to paying for your purchases and is commonly found in the wallet of every working individual nowadays. One reason for that is the convenience a credit card gives to its holder. The convenience to buy anything he wants without needing to carry a huge amount of cash or buy something he wants even if he doesn’t have the money.
Oops. The former makes a credit card sound good to have but do the latter sounds good to you too? If you’re not that well-educated when it comes to finances, then you may think that is pretty awesome but if you are, then that may sound like a temptation to spend more than you could have. That is definitely not a good thing if you ask me.
Another reason why a credit card wouldn’t be good for you is that it can increase your chances of buying on impulse. That happens when you go in a shop and find something that attracts you and without second thoughts you buy it immediately because you have a card on hand that could pay for it.
There’s a reason why credit card companies continue to flourish and one of those is the unawareness of most people when it comes to using their credit card/s. You spending using a credit card make them richer; unfortunately, the effect is the opposite when it comes to you. You may think that using your credit card helps you save money because of the rebates and rewards but really it is not.
A good example of this is when you buy an item that could be paid on installment in a period of 3 months, 6 months or a year with 0% interest, if only you use your credit card. Let’s say you decided to buy an item worth $100 or 4,200 Php and you want to pay on installments for 6 months, meaning you’ll be paying only $16.67 or 700 Php per month for that particular item.
Do you think you’re doing the right thing because you can take that item home immediately without you paying the full price and only paying almost $17 dollars or 700 pesos per month?
For me, you did wrong. Why? Well, because that $16.67 dollars or 700 pesos would reflect on your credit card bill each month for 6 months. You don’t have to pay any interest for that item but you will still be paying the interest that you’re credit card issuer is charging you, making you pay more than the real price of the item if you pay it on cash.
If you’re card charges 2% interest per month, then you’ll be paying over $17 or 700 pesos per month. That may not sound that bad because it’s still a small amount but what if you decided to purchase more items in installments and for longer terms. Do you think it still good for you to use your credit card just so you can pay on installments?
Well, those are just my take on why having a credit card could be bad for you. In the end, it all depends on you and how you’ll be using your card.
Now, could you say that you’re utilizing your credit card the right way? If you can’t, why is that?
Photo Courtesy of 401(K) 2013