Ever heard the old saying’Clothes maketh a man.’? Well today’credit maketh a man.’. At least in a country like the United States where CREDIT IS EVERYTHING.
To start with let me define credit in less parochial terms for those of you who have a penchant for whipping out the plastic. Credit is money you will OWE if you use it. That is the bottom line. However you choose to look at it, the sudden financial flexibility you believe you have been afforded by credit is no more than a momentary lapse of reason, no more than an illusion of monetary freedom. The minute you do the math, realization will dawn on you. The reality of it all is that there will come a day when you need to pay that money back - with interest. And you will end up spending more than your expenditure is actually worth. All because you couldnt wait to save and then spend. Sweet, unstoppable impulse.
Everything I said above is theoretically true. But here’s where my rambling stops. For, unfortunately like the millions of capitalist zombies feeding off lucrative promotional campaigns by gung-ho greedy creditors, I too claim complete and total victimization and surrender to the higher power. Credit, like it or not, is a way of life at least here in the States. And if you can’t beat’em, join’em(and quit whining!)
My first experience with plastic money was about 6 years ago when I was working in India as the stereotypical pre-millenium overpaid and blatantly underutilized software engineer. Yes, I’m talking about the golden era that most of us wish had never ended. To be honest - at that time, having a credit card for me was more like a fashion statement than anything else. At a time when IT was at the top of its game flagrantly riding the high wave, and where the coffers were jingling regardless of what you were actually worth to your organization -(sigh) - a credit card was just another accessory decorating a wallet.
But that notion was to quickly change when I came to the United States as a student about 4 years ago. Gone were the oversized bank accounts. Working a 20 hour a week job at minimum wage for the first semester, I had barely any flexibility outside of my necessities. Well that’s when the credit card took a whole new dimension. First off was the breathing room it gave me in terms of spending money. Then secondly, as I very quickly discovered, in some cases the only payment option I had was a credit card(like car rentals). So of course my impulse to’plastic-guzzle’ increased a hundred fold. It got so bad that I remember occasions when I would buy something as ridiculous as a 1 dollar coke at the 7-11 with a credit card. Needless to say, my debts grew higher and along with them, my inability to pay them back! If any of you ever contemplated a credit conspiracy theory in capitalist America, I could stand testimony for it. 4 years later here I am - wiser and oh . a few thousand dollars in debt.
Having recanted my woes to you credit happy folks - here are a few cautionary words from a shaken but not so stirred credit target.
Use credit within your means
Credit ain’t your worst enemy. You are. Just like anything else in moderation is good, so is credit. Use your discretion before you decide to pull out the plastic. If you decide to splurge, do it within your means. All credit does is give you the leverage over your current financial situation to spend more than you can with your own money. But the buck(literally) stops there. Unless you have a compelling reason to buy whatever it is you need, I would recommend going easy on your extra capital.
Read the fine print
This might apply more to people living in the US - but can be used as a general rule of thumb. Read the fine print. As with every marketing gimmick out there, credit card companies will highlight only what you WANT to hear. But then the real important stuff(which is what you SHOULD hear) is always in an obscure location. If you have a habit of ignoring those barely visible letters, kick it. Sharpen those eyes, pilgrim! That fine print gives you the real dealio. Especially when it comes to annual percentage rates and other benefits, you will find a bunch of’exception clauses’ that are so generic you’ll end up qualifying as one no matter what.
Don’t make your wallet a credit card holder
Ah the temptations of a credit card. The more you have the richer you are? The glory is oh so painfully short lived. One careless extravagant moment and you could spend the rest of your life paying for it. So keep those urges down. Limit yourself to ONE credit card that you use in case of emergencies or in cases where the only payment method is your credit card.
Keep your credit rating respectable
If you live in the US, credit ratings are an all too painful reality check. When you feel the familiar cravings to get yourself a card, think. If you’re getting one for the first time, you’re ok. If you’re getting another one, you really ought to spend some time and re-evaluate your needs. Are you financially up to speed with how much you owe? Are you going to use your credit card to pay off another credit card? What is the probability that you will get declined? Everything counts. Credit ratings are evaluated using a bunch of criteria such as your promptness in paying off debts, how often you use credit cards, and whether or not in using them you have had any delinquencies like charge-offs on bad debt and/or revolving credit. So work towards building a respectable rating. Not using a credit card may not be a solution because that does not indicate your propensity to borrow and pay off creditors - and unless you establish a history you’re probably on the same boat, if not worse, as someone with bad credit. Use your credit card, buy what you can within your means and pay it off on time. As a matter of fact, I’ve also been advised on more than one occasion to make a big purchase on a credit card and pay it off in instalments as opposed to paying it all off on the due date. The theory being that you are willing to give the creditors an incentive(by paying interest in each instalment) to lend you money.
If your impulse is beyond control use a charge card
If not seeing that mastercard or visa logo drives you batty, here’s a quick remedy. Get yourself a debit/charge card. Most charge cards offer you almost all the benefits of a credit card except for the fundamental difference. With a charge card you ARE using your own money. Make no mistake about it. Even though carrying a debit card means that you dont have to carry money around and it feels like you have a credit card, debit cards serve as an unlikely cure for the quintessential credit addict. Don’t let that MasterCard or Visa logo fool you. That’s where the similarity ends. Even though they look strikingly similar, debit cards carry a subliminal message to not overspend whereas credit cards invite you to go to town. With debit cards, the effects of overspending are instantaneous. For while credit cards offer you the financial leverage to throw your money around, with debit cards a couple of spending bonanzas can wipe your bank account squeaky clean. That’s when you’re really in a dilemma. A couple of those can set the worst spendthrifts straight.
Having said all the above, here’s the parting shot. Credit can be your maker or breaker. What you choose to do with it is entirely up to you. Tempting as it might be, there’s a huge downside to credit, which is you OWE money to someone else! And if you know you can’t pay back what you owe, don’t pay in the first place. There’s nothing like buying what you want with your honest hard earned money. At the end of the day those are the things that make you smile because they are truly yours.