Friday, October 5, 2007

The Good and Bad about Credit Cards

Nowadays it's easy as pie to get credit cards. Go malling and you'll find agents handing out application forms and approving accounts within a week or so. They'll even text you to remind about your application and requirements.

Are credit cards a good thing? My answer is, that the answer lies on the hands of the card holder.

The Good

Credit cards are heroes when it comes to emergencies. Not shopping emergencies but when you find yourself short of cash for gasoline, food, or bills. Hospitals accept credit cards and somehow, a credit card becomes a status symbol of sort. Like a golden ticket to restaurants and other establishments. But with the onset of easy applications and approval, i doubt if this still holds true. Another plus is credit cards let some people manage their expenses more because they are logically presented in the bills. Installment payments are also enabled by credit cards and sometimes, it's 0.00% interest! You can get that laptop without having to evacuate the entire wallet.

In short, credit card gives the holder flexible terms and security in times of money shortage. It organizes their expenses and for some, the cash outlay will be more controlled because you'll only cash out once a month. It's also a bit safer to carry a card instead of cash.


And this i'll tell from experience. I shall coin this the "doubling effect". When you have a credit card and you are an impulse buyer, i suggest getting a pair of scissors and cut the card in the middle. Credit cards may make you feel like you have two times the money. Imagine, you can buy this on credit and you can buy that with your cash on hand. This is mostly the case of poor credit card victims.

When the bill arrives, you won't be able to pay the entire balance because you already exhausted your cash on hand. And here is where the interest ball starts rolling. 3% may seem small but when you pay 3% every month and it adds and adds up to the debt, it becomes a financial strain.

What to do

Personally, i suggest not getting a credit card at all if only for personal reasons. If you already have one, prevent yourself from swiping it for petty purchases wherein you can simply use cash. Paying cash hurts more than swiping a credit card, wouldn't you agree? and by using real money you realize that it is a real expense.

Credit cards are good to use for major and planned purchases like gadgets, appliances, or intangible services that are PLANNED. Especially with installment terms. Just make sure you already have the money to cover everything before buying. Simply use the credit card to give you an extension and flexibility in cash outlay.

I could ramble all day about credit cards but I guess these are the major points all of us, including me, need to remember. I've already trashed my credit cards since last year. Even when they tried running after me and give me new ones, i decisively declined. From then on I cured myself of the doubling effect and started saving more.


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shannon said...

you know, too many people any more don't realise just how much those petty little credit card transactions can hurt them in the long run. its so easy to get into debt anymore that you can't get yourself out of. this is all very good advice.

Hunkston said...

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