Life Lessons: Credit Card Dos and Don't
I always believed that I was a person who knew how to use credit cards correctly, and so when I was earning enough money, I applied for one. Well, I was so wrong. By 2010, I had incurred enough credit card debt that would have enabled me to buy a new car. But that is getting ahead of my story. Before I begin telling my credit card saga, I would like to make mention of Diner's Card Corporation, the very first company that gave me my very first credit card in 1988. Many years later, I would realize that among my many other credit cards (I had 6), it was the most friendly and had great customer support. When it was time to close down all my accounts, Diner's gave me the fastest response and facilitated an installment process that was painless and stress-free. All the others get a double, no make that triple thumbs down from me. And so, here are the hard lessons I learned regarding credit card use. Hopefully these will inform and warn potential card holders before they fall into the credit card trap.
Before You Apply/Accept
- Check out it's customer support services. Most credit card companies do not have offices/staff in your areas or local banks. When you need assistance or clarifications, the only access to them is either through phone or email. This can be very stressful when you need immediate answers or support.
- Read the contract and it's fine print. Ask questions and clarify vague provisions. Check out all fees and what they are for.
- Make sure that you know enough and understand the use of a credit card before applying (or accepting a pre-approved card) and using one.
- Do not use your card to make ordinary purchases. Pay in cash for essential goods like food and gasoline.
- Do not use your credit card to buy things that you will not be able to pay in full when the bill comes. Sometimes we may not have the cash with us when we need to buy things like medicine or groceries, or we have the cash but need it for something else. If so, make sure that spending is within budget and cash will be available when it is time to pay.
- Do not get into the habit of paying only the minimum amount due. This will lead to higher amounts of interest on the balance creating a bigger and unmanageable credit card debt.
- Don't leave your credit card lying around and always get it after every purchase. Check your purchases and make sure that the amount stated is correct, before you sign the receipt or invoice.
- Don't buy things just because you want them. Always ask yourself if you need that something. Most of the time, you really don't.
- Do not make cash advances on your credit card.
- Do not purchase services like insurances or card protection.
- Have only one credit card for emergencies.
- Be responsible. Stay within 30% of your credit limit. For example, if your credit limit is Php10,000.00, use only up to Php3,000.00 for that billing period. In this way, you can control your spending and manage payment better.
- Keep your credit card at home when you go shopping. This will prevent unplanned purchases that can only lead to credit card debt.
- Check your bank statements every month. If there is anything that does not look right, immediately call or email the number provided in the billing statement.
- DO PAY IN FULL and ON TIME. This is to avoid finance charges and interests which will only add to your balance and lead to debt.
- Report any lost card immediately.
The list above should give you a very good idea of what I did wrong. It wouldn't have been all that bad if not for the fact that I was jobless for more than a year. No job = no salary = can't pay! As soon as I realized I would not make my monthly payments, I immediately called the credit card companies to let them know that I will not be able to make my next monthly payment on time. It was Diner's Card that immediately assisted me, I briefly explained the situation and they responded with a very simple process that took exactly less than a day. The biggest plus for Diner's is the fact that they have an office and staff that you can personally see and talk to. All others used only call agents or email to communicate. For one bank, it took more than a month to settle on a payment scheme, but the WORST was that "bank" who took me around in circles asking for the most illogical documents until finally when I told them that they were the only bank that does not seem to want me to pay them, they decided to approve my request for credit restructuring after almost 3 months from the day I informed them that I was out of a job. What was terrible was the fact that while they were processing my request, they kept on charging me late payment fees because they refuse to suspend my card even when I already requested them to do so. I refuse to pay the late charges and told them that many just abscond on their credit card payments, but not me. I want to pay and they are making it difficult for me to do so. This is the reason why, I advise future credit card owners to check out the customer support service of the credit card company they apply to.
Credit cards have practical applications in life, but it should be used wisely and thoughtfully. My dictum today is..."if I can't afford it, I should not buy it"..."if I want it, I will save for it".
Disclosure/Disclaimer: The author has no professional relationship with Diner's Card Corporation. This post is written from the author's own experience and does not in any way guarantee the same for others..