Credit Cards and its dangers
Written by R. A. Stewart
“The borrower is a slave to the lender.” Proverbs 22:7
Credit cards are marketed as a financial tool to enable people to fund their lifestyle with money which is not theirs. It is called debt and there it has one major drawback and it is this;
You are charged interest on money which you borrow and when the debt grows the interest payment gets out of control.
The result is that the debtor is in financial strife.
Even if you manage your credit card in such a way as to minimize interest payments, borrowing money for discretionary items is a bad habit to get into. It is funding a lifestyle which is beyond your means. There is one word for that and it is “Greed”
The ease of obtaining money which you did not earn can give you a false sense of financial security. It is a mistake to think that just because you have a good credit rating then you are good with money. The opposite is true, if you are like me and have never had a credit card then well-done.
Minimum payments on credit cards can be very low which means that it can take years to clear a credit card even after you have stopped using it.
There is a temptation to overspend with a credit card. The incentives which credit card companies off encourage card holders to spend money which they do not have. This in a nutshell is spending tomorrow’s money today.
Tomorrow always comes whether we like it or not.
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Dependency on credit cards can prevent you from gaining solid financial habits. Instead of saving and investing your money you can get into the habit of using your credit card for everyday purchases. This can destroy your financial discipline and prevent you from owning a home or saving for your retirement.
Fraud and identity theft are a concern with credit card. If you card is stolen then you could end up with a credit card bill for money you did not spend.
“If you don’t have the money you don’t buy it” is a good motto to live by.
Borrowing money to keep up with the Joneses may have been normalised due to the slick advertising campaigns of credit card companies over the years but the crunch always comes when you have to pay it all back plus interest.
Building up an emergency fund will help you to cope with unexpected expenses such as car repairs, dentistry bills, appliances which need replacing. Using a credit card to purchase items which should only be paid for out of your discretionary spending money is financial stupidity.
Here is another point I wish to stress here. If you have debt of any kind then you do not have any discretionary income until that debt is paid off. If someone is good enough to lend you money then you should be good enough to pay it back.
What is the alternative to a credit card?
A debit card works the same as a credit card as far as using it to make purchases online but the difference is that you are using your own money. You can only spend what is on your debit card. If you are travelling overseas then a wise travel card is a better option than your own bank’s debit card because wise will save you a lot of money in bank fees.
A wise card is similar to a debit card in that you can only spend whatever is on the card.
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