How many times have you heard yourself saying:
"I'm getting my pay next month. I can pay it off!"
"But there's a 5% discount if I buy with my card."
"I'll pay the minimum first and when I get my bonus, I'll pay off everything."
"It's an emergency! It's the last one!"
What was the worse excuse you've given yourself to justify using your credit card when you shouldn't have?
Let's take a look at the reality of credit cards.
Reasoning: "I'm getting my pay next month. I can pay it off!"
Reality: Car breaks down next month and the extra from your pay goes to the mechanic.
Reasoning: "But there's a 5% discount if I buy with my card."
Reality: You can't pay up promptly an there's a penalty, your outstanding balance increases, so does the interest rate. How much was your discount again? RM5?
Reasoning: "I'll pay the minimum first and when I get my bonus, I'll pay off everything."
Reality: And when you get your bonus, you sign for a holiday to Hong Kong.
Reasoning: "It's an emergency! It's the last one!"
Reality: I understand that the palette is limited edition but it's not a matter of life and death. If you don't have the money to buy it, don't. If you wanted it so bad, you should've saved up for it. Try "My dog's sick and needs surgery" instead.
Personally, I own two Platinum cards and I don't need to be cutting them up in order to control myself. We're humans and we're gifted to have self-control, which is what prevents (some of) us from hacking that-bitch-who-stole-my-boyfriend to death. Besides, if you cut up a card, it doesn't mean that your card has been terminated. You can simply call up the bank, report it missing and get a new card within a few days. Don't forget the RM12 charge.
Money on credit is money that you don't have. It's borrowed money. How would you like to borrow money from your friends and family every time you shop? Unless of course, you have no shame. You'd prefer to borrow money from a stranger, right? And hope that you never see that person again so you won't have to pay them back? Sorry, honey. The bank's closer to you than you think and they're most definitely less forgiving than family members.
The credit card is not completely evil. It does come in handy for many situations -- purchasing air tickets online, avoid carrying a lot of money when you have to make a big purchase or travel, real emergencies, etc. For those reasons, you're using the credit card for its convenience. That's what the credit card is essentially for.
Here are a few suggestions on how you can control your credit card spending:
- Don't own a credit card. Live on cash terms. You don't really need a credit card. Even if you do, don't make a habit out of paying with your card when you have the cash. You may not feel it now but you'll most definitely feel it later on.
- If you need a credit card, you can get someone to subsidize one for you so that the principle will always know of your spending. And trust me, when it goes overboard, the principle will hunt you down.
- Set a realistic limit to your card. For most cards, you can get the bank to set a credit limit for your card so that it'll act as a reminder if you're about to overspend.
- Before you spend on credit, make sure that you already have the cash to pay back. In instances like purchasing air tickets, it's easier to use a credit card but if you don't have the money in hand for the ticket, you probably shouldn't be buying it in the first place. Real emergencies aside.
- Put that cash aside for when you need to pay back. Some banks allow you to pay through auto-deduction from your bank account so make sure you have enough in your bank account and avoid from spending more that you have. If you're about to spend more than you have, make sure to deposit the difference into your account before the due date for payment.
Growing up, I was a rather privileged child, enjoying spa treatments in places fancy enough to have elevators for cars, all at the tender age of 9. That's what well-off people do, right? What I didn't know was that my parents were living in debt and that includes credit card debts.
Fast forward into my teenage years, my parents got separated, we don't have our weekly spa trips anymore and the house is gone. Sounds tragic?
When my mom finally decided that it was time to stop making excuses and pay off her debts, it didn't take long before she stopped seeing minuses. Now in the present, we have a modest house that was bought and we can actually afford to keep and my mom still drives a 14-year-old car while I don't have my own. But we're now richer than we seemingly were before. We're now debt-free.
A lady who holds a Louis Vuitton and is RM3'000 in debt.
Or a lady who holds a Rootote and has no debt.
Who's the richer person here?
It wouldn't matter if you have all the material things to show the world when you don't actually have the money to pay for them.