Credit cards, a necessary evil

Whether its hype, or banks ubiquitous marketing methods or actual need, it now seems unavoidable to live without a credit card. And now they are relatively easy to get.

If you have a pay-slip, you can always get one. There are even others designed for the subprime markets, for people with NINJA status (No income, no job no assets).

It’s hard to get a hotel booking (in some hotels, at least) if you are card-less. The many internet firms selling merchandise online will require you to pay using a credit card.

The reality is that the cards are not for everyone, and those with less than rosy credit card history will find that it is actually hard to acquire one, and with the interest charged on some of them almost equivalent to the price of an arm and a leg, many exasperated credit card customers are opting out.

The trick that many who are annoyed by their credit cards don’t seem to appreciate is to stay below the limits of your credit.

Unless someone is confronted with an emergency and has to incur some expense, there is no reason for one to flush out the card at the slightest excuse. The best thing is to use them as they are real cash.

Self-esteem is said to influence how one behaves in public, and if by flushing out a plastic makes one feel good in public places, the person may find out that that self-esteem is under attack when the bills come.

Credit Cards Do’s and Don’ts

There is a lot of truth in the advice that credit cards are not a substitute for not having money. Every time you use a credit card this should be the theme replaying in your mind. And you would do good to remember the following too.


* Always plan for the purchases that you need and those that you want. You need the essentials, and you want everything else. The ability of making a distinction might help you plan wisely.

* If caught up in financial difficulties, it’s always good to talk to the issuer who might re-schedule your payments. If you simply default, that only helps to build up an unfavorable credit history and you might find yourself being denied credit next time.

* Unless it is an emergency, staying within your credit limits will help you a great deal. If you must spend over the limit, ensure you are within the manageable levels, say within 30 percent.

* And if your mails are flushed with more favorite deals than you currently are enjoying, you may approach your issuer for a better deal. They want to retain you as their customer, so they will listen.


* Do not use your credit card to make house hold purchases. It’s expensive in the long run

* Do not just pay the minimal amount. You will end up paying exorbitant interest. The quicker you clear the debt the better.

* Do not use the credit card to purchase things you can’t afford.

Becareful with your Credit Cards

Be warned, Does the credit card work for you or do you work for your credit card?

Most people’s answer to that question will depend on how they treat their “old plastic” as credit cards are known.

For many with burned fingers will tell you they didn’t realize that things had gotten so bad until very late, because most credit card offers try much to sound like they are actually running a charity. Well, they aren’t.

And this is not a hate campaign against credit cards. Surely they have their benefits – in America if you want to rent a car, you got to have a (major) credit card.

But, consider this scenario: You receive an offer in your mail that sounds good, maybe it’s a new generation TV or a fridge. But it costs $2000. Oh, but you have a credit card with a $5000 limit, and you immediately purchase your merchandise.

Typically, here is how your repayment schedule will play out. Most credit cards charge a minimum of total balance (usually 2 percent) of the total per month.

Assuming the interest rate is 18 percent and you choose to repay the minimum amount of $40, $30 of that will go towards interest and only 10 percent towards the principle.

As a result, you will take 30 years to repay and end up paying over $5000 interest.

Sounds scary? It doesn’t have to be. The moral of the illustration is: Use the credit card the same way porcupines make love; very, very carefully.

Advantages of a credit card

The Chinese are credited with coming up with numerous inventions including gunpowder, umbrellas, chopsticks, paper and paper money.

Lamentably, (from Chinese point of view) the honors of coming up with plastic money went with early American capitalists.

From the time John Biggins, the inventor of a first bank issued card, had his first eureka moment in 1946, credit cards have evolved to become one of the most versatile ways of paying, and this is why. Once issued with one, the need to carry around unsafe, dirty and
bulky cash is significantly diminished.

I say diminished because some small scale merchants (who perhaps are scared of technology) will still insist on being paid in cash. Further, credit cards enables you to build up a credit history, but only if you always pay on time.

In some countries such as UK, if you buy goods using a credit card and the goods turn out to be faulty, they are usually insured for a period of time, say two months, and you can be indemnified even for total loss.

Credit cards are safe, and even if gun-totting miscreants help themselves to your wallet, you can make hit back by simply calling the credit card company and canceling the stolen card.

Another thing going for credit cards is that you can keep track of your transactions, and it’s thus easy to keep track of your expenditure. I could go on and on, and whatever the doomsday prophets say, plastic money is here to stay.